Diversification of a 'rentier state' economy : the case of Brunei Darussalam

Voon, Raymond. (1998). Diversification of a 'rentier state' economy : the case of Brunei Darussalam Master's Thesis, School of Economics, The University of Queensland.

       
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Author Voon, Raymond.
Thesis Title Diversification of a 'rentier state' economy : the case of Brunei Darussalam
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 1998
Thesis type Master's Thesis
Total pages 75
Language eng
Subjects 14 Economics
Formatted abstract The issue of economic diversification has never been more prominence ever since the economic rise of Arab nations on the backs of petrodollars. Negara Brunei Darussalam or Abode of Peace (henceforth Brunei) has an economy more akin to that of Kuwait or the United Arab Emirates: a modem Islamic micro-state endowed with vast reserves of oil and natural gas. The development and character of these oil-based economies (including Brunei) have been significantly dictated by the growth of their hydrocarbon industries. This overwhelming economic dependence on burgeoning oil revenues could lead to undesirable consequences on long term development programmes. Evidence of "Dutch disease", unproductive social expenditure and the phenomenon of 'rentier state' have been linked to the massive influx of revenues following the export boom in hydrocarbon commodities. Moreover, these hydrocarbon reserves are non-renewable resources and once depleted, Brunei will have to rely on other means of survival. Brunei has been working towards that end by implementing seven major national development plans since 1953. The quest for greater economic diversification that could paved the path to a sustained economic growth and development has been greatly intensified following the increasing susceptibility of the hydrocarbon commodities to world prices volatility and the speculation on the depletion of their reserves. Brunei's first serious attempt to hasten the pace of industrialisation and economic growth in the non-oil sectors was through its third National Development Plan (1975-79). Economic diversification programmes have since been progressively implemented in the search for a sustainable economy. The primary objective of this thesis is to investigate the linkages between hydrocarbons, economic development and diversification of Brunei's rentier state economy. The study of Brunei's attempts at economic diversification will be examined from two perspectives - the impact of the hydrocarbon's contribution to economic growth, and the inter-temporal trends in inter-sectoral diversification of Brunei’s economy. The results and implications from the analysis are consistent with the findings contained in the literature survey. The resilience of the Bruneian economy to diversify its exports remained apparent, with the oil sector (includes crude oil/petroleum and liquefied natural gas) still contributing (until the last few years) on an average of over 95% of Brunei's the total export value. However, its contribution in terms of GDP has been diminished significantly over the past twenty years. The diversification process is far from complete and it is doubtful that a full diversification of such an economy is ever possible. Political factors have played a significant role in the diversification process and they cannot be completely divorced from wider economic development strategies of the state. Instead, this relationship serves to reiterate the central importance of Islam.

 
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