Focusing on our smallness: Human capital development

Focusing on our smallness: Human capital development


Key to success: Brunei has one of the highest standards of living in the world thanks to its rich natural gas and petroleum resources. Picture: Rudolf PortilloCentre for Strategic
and Policy Studies
BANDAR SERI BEGAWAN


Friday, June 27, 2008


AS A small nation state, Brunei is in a unique position when compared to other similar-sized countries around the world when it comes to economic development.

While other small nation states such as Singapore, Luxembourg and Iceland depend primarily on its human capital stock for its economic development, Brunei's development has had a helping hand, spurred on by a blessed abundance of oil and natural gas, driving Brunei's GDP per capita to being one of the highest in Asia. In the 2007/2008 Human Development Index ranking, Brunei Darussalam was ranked 30th out of 177 countries, and 5th amongst all Asian countries, and ranked send amongst Asean countries. Bruneians currently enjoy a relatively affluent lifestyle, but this lifestyle and its current state of social welfare may not be sustainable in the near future, as the country remains mired with difficult challenges to its economic development. Notably, these challenges include a failing economic diversification strategy despite efforts since the 1970s to kick start diversification from its over-reliance on oil and gas. Findings from the latest research on Brunei's failing diversification efforts also uncovered a lack of clarity of purpose for its economic diversification efforts, as highlighted in the recent Economic Diversification Roundtable Meeting held in June 2008 by the Centre of Strategic and Policy Studies in collaboration with Asia Inc Forum. Almost as important, any discussion of economic development for small nation states should also touch on its characteristic of smallness, specifically in reference to their relatively small population size and consequently the small pool of talent and human capital it can draw from. For Brunei, this is no different. In fact, it is more crucial to address this issue given that over the past 50 years, the Brunei economy has depended too heavily on natural resources rather than the human kind to drive it forward. In order for Brunei to maintain its rate of growth and standard of living into the future, we must ask important questions of ourselves: Has our country developed and readied its human capital stock to ensure it can fill the void left behind by dwindling oil and gas reserves when the post oil-and-gas era hits Brunei? Given that Brunei does not have a large population, it becomes pertinent then for the country to not only focus on getting the quantity of highly qualified human capital up, but also to improve the quality of its human capital. A degree of specialisation in its human capital development efforts is also important for Brunei as research has shown that small developing states are able to strive and compete in the international arena, but only on the basis of a narrow specialisation based on their natural advantages.

If specialisation is not achieved, Brunei may run the risk of spreading its expertise of human capital too thin, and consequently never reaching a critical mass of skill pool in any particular industry targeted by the country as future industries and markets of worthy endeavour. Brunei, therefore, must learn from lessons of other small nation states, and leverage its natural advantages of oil and gas to develop its human capital stock in order to identify which area to focus on and specialise in. Then the challenge would be successfully translating those lessons into real world practical terms exemplified through human capital development plans that are not only clear in its purpose and direction but are also aligned with the long term strategic direction of the country, rather than fleeting fad directions propagated by the media. Each ministry of the Bruneian government has a role to play, but none more important than the role played by Brunei's Ministry of Education. As the custodian for the country's human capital development strategy, the Ministry of Education will have to make tough choices for its education policy to protect the long-term interest of the country. Trade-offs, the kind that was mentioned in the Economic Diversification Roundtable June 2008, will need to be made, and competing interests between individuals, institutions, and ministries will have to be managed. Educational and human capital development strategic policies that may have been put in place for non-economic reasons may need to be re-examined and difficult choices and tradeoffs will have to be made.

Sooner or later, Brunei will need to decide on these tradeoffs, as eventually they will turn into important necessities for success rather than luxuries that are currently afforded to us by our abundance of wealth — in essence, as the saying goes 'one cannot have the cake and eat it too'. Successful human capital development will require the country make crucial tradeoffs between economic, social, political and sometimes religious needs.

However, the Ministry of Education cannot do this alone. Its efforts are only as effective as the coordination and assistance it gets from other government ministries, and importantly, the private sector. Global and local labour market forces will shape how Brunei's Ministry of Education choose to formulate their human capital development plans, but we must also encourage the Ministry to develop and fine-tune its efforts to ensure those market forces are heeded, and incorporated into any such plans. Success will come from all government ministries working in tandem with the Ministry of Education towards a unifying goal, rather than individual political interests inadvertently pulling the country every other way, and consequently losing clarity of purpose for the country's diversification efforts. Human capital development is an important agenda for Brunei for its future welfare.

Lessons from other countries of similar size should provide a clear picture of what Brunei needs to do as a nation. Countries such as Luxembourg, Iceland and Singapore may have no natural resource of any kind, but evident from each country's GDP and HDI ranking (Iceland is ranked 1st, Luxembourg ranks 18th, while Singapore is ranked 25th), human capital is key to their success stories. Luxembourg for example, while geographically and culturally different from Brunei, have a similar population size of approximately 485,000, yet affords its people a GDP per capita three times the size of Brunei's. At an average GDP per capita of US$90,000 ($123,166), Luxembourg's economic development is not down to its natural resource but on human capital: 85 per cent of its US$50 billion GDP economy is primarily driven by its services industry. So too is Singapore, who have no natural resource to speak of, even importing its water from neighbouring Malaysia, but yet have a GDP per capita higher than Brunei and an economy primarily driven by its human capital through its services and financial sector. And Iceland, with a population less than Brunei's, affords its population a GDP per capita of almost US$33,000, with zero oil and natural gas, depends on its fishing and services industry to drive its economy forward. If Brunei makes those important, but sometime unpopular decisions that will have significant tradeoffs for society, perhaps someday Brunei can rub shoulders with Iceland, Luxembourg and Singapore in the HDI rankings. More importantly, success would also mean Brunei can afford its people more of the affluent lifestyle it now experiences, if not better.

The Brunei Times