Interesting News
Some interesting news pieces today from The Brunei Times and Borneo Bulletin. Both papers reported on the issue of excessive personal lending in our country, and most of us already know that if we continue on our credit spending habit, ALOT of people will end up in financial difficulties. The only saving grace for us is that our society provides alot of safety nets when it comes to financial difficulties: His Majesty's Government, family & friends, and religious institutions. But I hope we don't overwhelm whatever assistance that is provided and redirect attention from more positive projects that these agencies can do for our country.
In other news, looks like another bank has decided to 'maybe' hop on the Islamic Banking bandwagon, another positive sign showing our country's push to make Brunei a central hub for Islamic Banking and Finance. Islamic Banking and Finance has the biggest potential to grow and there are alot of potential investors who would like to invest in Islamic funds but have difficulty doing so due to its limited reach at the moment - a friend of mine have been thinking of investing but cannot find any Islamic funds where he lives and if there is a fund, it is still too new for him to judge whether the fund is doing well (yes, historical past performance DOES NOT necessarily mean or promise good future performance, but it still helps to know). So let's hope this one continues to grow and show progress.
And lastly, price capping and control is on the agenda again, this time for the construction industry. Brunei currently already have price caps and/or subsidies: caps for cars, and subsidies for essentials such as petrol, rice etc. But normally caps and subsidies are only introduced for 'essential items' (cars are listed as essential items by our government by the way). Normally price caps aren't favoured by economists as they distort free market mechanisms and can actually harm the industry in the long term, even for essentials such as food - and in economics, rent (see here and here). And here's another explanation why price controls aren't a good thing in construction, courtesy from the Massachusetts Institute of Technology:
Remove price controls. Experience shows that price and distribution controls on conventional building materials, such as cement and roof sheets, reduce the incentive for new producers of alternatives to become established in areas remote from the point of manufacture. Removal of price controls would put up materials prices in some areas initially, but may help stabilize them in the long term by bringing forward new small-scale locally produced alternatives.
(Source: Here)
Let's hope the government agencies looking into this consult our local and international economists (which I'm sure they will) to avoid any unintended consequences of actually harming the industry in the long term.
P.S. By the way, I firmly believe that Economics should become a core subject for ALL Secondary level students for Brunei in the near future. We need more economists and we need them badly.
Some interesting news pieces today from The Brunei Times and Borneo Bulletin. Both papers reported on the issue of excessive personal lending in our country, and most of us already know that if we continue on our credit spending habit, ALOT of people will end up in financial difficulties. The only saving grace for us is that our society provides alot of safety nets when it comes to financial difficulties: His Majesty's Government, family & friends, and religious institutions. But I hope we don't overwhelm whatever assistance that is provided and redirect attention from more positive projects that these agencies can do for our country.
In other news, looks like another bank has decided to 'maybe' hop on the Islamic Banking bandwagon, another positive sign showing our country's push to make Brunei a central hub for Islamic Banking and Finance. Islamic Banking and Finance has the biggest potential to grow and there are alot of potential investors who would like to invest in Islamic funds but have difficulty doing so due to its limited reach at the moment - a friend of mine have been thinking of investing but cannot find any Islamic funds where he lives and if there is a fund, it is still too new for him to judge whether the fund is doing well (yes, historical past performance DOES NOT necessarily mean or promise good future performance, but it still helps to know). So let's hope this one continues to grow and show progress.
And lastly, price capping and control is on the agenda again, this time for the construction industry. Brunei currently already have price caps and/or subsidies: caps for cars, and subsidies for essentials such as petrol, rice etc. But normally caps and subsidies are only introduced for 'essential items' (cars are listed as essential items by our government by the way). Normally price caps aren't favoured by economists as they distort free market mechanisms and can actually harm the industry in the long term, even for essentials such as food - and in economics, rent (see here and here). And here's another explanation why price controls aren't a good thing in construction, courtesy from the Massachusetts Institute of Technology:
Remove price controls. Experience shows that price and distribution controls on conventional building materials, such as cement and roof sheets, reduce the incentive for new producers of alternatives to become established in areas remote from the point of manufacture. Removal of price controls would put up materials prices in some areas initially, but may help stabilize them in the long term by bringing forward new small-scale locally produced alternatives.
(Source: Here)
Let's hope the government agencies looking into this consult our local and international economists (which I'm sure they will) to avoid any unintended consequences of actually harming the industry in the long term.
P.S. By the way, I firmly believe that Economics should become a core subject for ALL Secondary level students for Brunei in the near future. We need more economists and we need them badly.
3 comments:
The problem with Islamic Banking is that it doesn't start from the ground up. It's more of a patched up job.
It is likely that so-called 'islamic banks' need substantial deposits in a central bank as a guarantee. These deposits generate interest.
Administrative charges are raised to mitigate omission of interest charges. Penalty charges are also higher.
The company structure should also be looked at closely.
The investments of such 'islamic banks' can also be questioned. Investments in 'islamic stocks and shares' need detailed investigations as financial markets are another issue, e.g true/responsible ownership and liabilities of 'stocks and shares', most of which operate in an environment of risk some would say is akin to 'gambling'.
Banks like SCB operate in a non-islamic manner and for them to start an islamic banking division, we need to look closely into the separation of these operations. I doubt if total separation is possible.
I'm sure the World Bank or IMF are both in favour of removing price controls as it favours the rich or the 'donators of aid'.
The World Bank and IMF only exist for its own well-being. It is not in their interest to see countries self-sufficient without need for world aid or loans.
The food shortages in Peru were not a result of price capping of essential foods to help the poor. It was shady and/or greedy organisations who tried to undermine decent proposals to have affordable foods for the poor.
Price fixing exists even in developed countries. Even in UK, prices are monitored (e.g. electricity, etc) to make sure consumers are not being exploited.
Fairtrade is about fixing prices to ensure farmers in developing countries are paid reasonably and not exploited.
I therefore disagree that price-capping should be removed wholesale without consideration of the common people. Capitalism breeds nasty businessmen of all sorts.
http://www.bt.com.bn/en/analysis/2008/08/06/importance_of_economics
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