“New Ideas and Bruneian Economy”
This article prepared by Muhammad Fikri and was highlighted by Brunei Times and Borneo Buletin newspaper. see the the highlight and summary on Brunei Times.
The Relationship among New Ideas, Entrepreneurship and Economic Growth
Dr. Samuel Johnson’s (1952), author of 1755’s A Dictionary of the English Language, defined ideas as the mental images or internal visual pictures. As such, they have no relation to words or the concepts which are designated by verbal names. Therefore based on Johnson’s definition, ideas is something, such as a thought or conception that is in our mind and will be useless without any translation.
It’s very important to translate our idea into reality because when someone successfully translated their brilliant ideas into something like goods or services than it becomes innovation. The goal of innovation is to create business value by developing ideas from mind to market. Once the ideas is translated into goods or services then commercialized, finally it ended with the business activity or usually called entrepreneurship. At the end of the day when many people come up with their brilliant idea in starting their own business, it will run the economy of the country.
Jason Henderson in his article defined entrepreneurship as the practice of starting new businesses in response to ideas translation. Entrepreneurship is increasingly being recognized as a primary engine of economic growth. By combining existing resources with innovative ideas, entrepreneurs add value through the commercialization of new products, the creation of new jobs, and the building of new firms. The Global Entrepreneurship Monitor indicates that nations with higher levels of entrepreneurial activity enjoy strong economic growth. In short, entrepreneurship is the link between new ideas and economic growth.
There are several ways how entrepreneurship stimulates economic growth. Carree and Thurik (2005) recognize that entrepreneurship stimulates growth through knowledge spillovers, increases competition, and expands diversity. Recognizing the role of knowledge spillovers, Carree and Thurik indicate that entrepreneurship leads to economic growth because it is the mechanism by which knowledge spillovers develop. Knowledge is endowed in a person or economic agent. Hence, it requires an individual entrepreneur to start a new enterprise thereby capturing the value of the knowledge embodied in the individual. Thus, entrepreneurship is the mechanism in which knowledge is commercialized and used to stimulate economic growth.
The second way entrepreneurship stimulates economic growth is through increased competition brought on by the creation of new enterprises. Interestingly, this second conduit by which entrepreneurship influences growth also contains a knowledge component. Carree and Thurik recognize that knowledge externalities, both within industries and across industries, emerge from competition for new ideas not the competition of product markets. As a result, knowledge externalities are more likely to emerge in competitive environments than in environments of local monopolies. By creating new firms, entrepreneurship stimulates the competition for new ideas and fuels the process of developing knowledge externalities.
The third way entrepreneurship supports economic growth is by spawning diversity among firms in a specific location. Carree and Thurik argue that entrepreneurship contributes to economic growth by creating diversity and developing channels for knowledge spillovers across firms.
Why with Brunei Economy? Why New Ideas Became Important to Brunei Economy?
With the real GDP per capita around 18.500 USD, currently Brunei is recognized as one of the wealthiest country in Asia. However, Brunei faces the massive problem to build a sustainable non-oil economy. As long as the oil reserves last (at least for another decade), Brunei has sufficient financial resources to support the government’s policy of heavily subsidizing basic and luxury goods.
Brunei economy grew at a modest and stable annual average real rate of 1.9% between 2002 and 2007. Oil and gas production provides Brunei with the majority of its export revenue and has accounted for nearly 90% of its GDP over the past few years. Brunei is the third largest oil producer in South East Asia and world’s fourth largest producer of liquefied natural gas. Thus, should we say it is a good or bad news by having annual average 1.9% for economic growth? To answer this question, we need to make a comparison with other countries’ economic growth. The table below shows the average economic growth of Southeast Asia countries.
Based on the data, we can answer the previous question by giving an illustration of Brunei economic condition as a person who is walking while the other people are running in reaching their goals. This illustration arises another question, when will we realize that we are supposed to run to achieve our goals?
Another thing about oil price, although known as one of the countries with the highest oil production in Asia, our country faces massive problem in the future due to the decreasing price of oil. Moreover our consumption increased year by year.
Based on the table 2 and figure 2 above, we can analyze that the current price of oil which is around USD 45 per barrel is the same oil price in 2005. Logically, we can say that the government revenue will be suffered in current condition. Furthermore, during the current global financial crisis, government’s investments overseas are suffered badly. If this is the case, how long we actually can survive with this kind of condition.
Therefore, slow economic growth and decreasing of oil price should be considered as the major threats to Brunei in the future and those two major reasons explained the important of new ideas for Brunei economy for the next future. In addition to the previous reason, there are two other minor reasons of why Brunei needs to improve its economic growth even though its GDP per capita is one of the highest in South East Asia. Firstly, economic growth improves the overall individuals’ standards of living in an economy. However, it is assumed that individuals always prefer more than less. For this reason, we are not supposed to settle with the current condition. We must always try hard to improve our quality of life. Secondly, economic growth is one way to reduce poverty in an economy of one country or worldwide. Moreover, we need to support the government project in term of economic diversification.
For all of those things, as a university student we should utilized our knowledge and resources to come up with our brilliant ideas in order to help our country by doing something. What are the possible things is start to think about building new ventures and creating new jobs rather than rely on government job.
As the last part of this paper, we come to the conclusion that new ideas are totally important for Bruneian economy. There are two major reasons what made its important, firstly is 1.9% stable annual average of economic growth is not enough for competing in global market even in the Southeast Asia. Secondly is about oil price, in fact oil and gas production has accounted for nearly 90% of Brunei GDP over the past few years and it becomes a serious problem due to the current condition of oil price has decreased significantly.