The Economic Planning and Development Department (JPKE) finally announced last Monday the much awaited ‘new’ GDP for Brunei. The last issue of the Brunei Economic Bulletin published by JPKE was for the 2nd quarter of 2005 which was released in December last year (all the Bulletins are available on bruneiresources website. I was told then that's why the 3rd and 4th quarters as well as the 2006 issues are on hold was that JPKE was revising certain figures. So now we know. The press release for the revised GDP is also available for downloading on the same site.
Brunei Darussalam’s GDP for 2005 is now B$15.9 billion which is revised from B$9.9 billion. So we have at a stroke raised our GDP by some B$6 billion. This makes our GDP per capita B$42,900 which should move us a few places up the GDP per capita world league table and probably (I could be wrong with my calculations here) should move us slightly ahead of Singapore. Someone commented yesterday on my Cbox, what does the revised figure mean for Brunei? Does it make me any richer? Do I feel richer?
First of all, we have to remember that GDP is only a measure of the size of the economy and is supposed to be the total market value of all goods and service produced within that economy at that particular point in time. If you did some economics, the basic equation will be GDP or Y=C+G+I+X-M which is the private sector + government + investment + exports – imports. All that JPKE indicated by the new GDP figure is that the size of the Brunei economy is much larger than originally estimated. According to JPKE, the improvements are due to a more comprehensive data coverage, new data sources, improved estimation methodology (still estimation, mind you) and adoption of two different approaches to GDP compilation. Previous GDP estimates only used the production approach.
So, all we now have is that the size of the Brunei economy has been ‘wrong’ or underestimated all this while. Given the new GDP per capita, our economy is now at par with the more advanced Asian economy and ranked about middle with the more advanced European economy. But the absolute total size is still small. So even with improvements with GDP measurements, there is no direct benefit to each and every single one of us because it is only the size of the economy that has ‘changed’. The biggest problem is that GDP per capita is used as an indicator of living standards as this is the only measurement which is available to every country in the world but it is not designed to be that. Our B$42,900 share of the GDP just means that you and I are living and working in a much larger economy than you think you used to be. That is all.
The measurement of GDP regardless of improvements made to the estimation still relies on many things which are not fairly measured. It ignores my mother’s and my mother-in-law’s efforts in raising their children for instance. Both my mother and my mother-in-law are full time mothers. Their efforts are not counted towards the GDP calculations as they are not ‘paid’. But if my father and my late father-in-law had employed maids, cooks and gardeners in order to do the same thing they do, then the salaries they received are counted towards GDP. If you buy nasi katok, that will be counted but if you make them, it is not counted. If your house burnt down and you rebuild it, it will be counted but if your house maintain as it is, it doesn’t count. And yet for all intent and purpose, you only have that one house whether newly built or an old one. You are probably worse off as now you have to find money to build that new house. Furthermore GDP per capita does not make any distinction as to whether you are in the richer or poorer category. If you are newly graduated and joined the government, the salaries you received are lower than that of the GDP per capita. Does it matter
So, at the end of the day, all we have is that GDP is only a measurement of the size of the economy. By its very nature, it does not attempt to do anything else. As it is the only common measurement available, it is us that tend to make much of it especially in using it to compare with other countries ‘development’.
What is really important are the changes in GDP every year as that does indicate whether or not the economy has progressed or components in the economy has changed. In this case, JPKE in their announcement has said that between the years of 2000 to 2005, the Brunei economy expanded in real terms at an average of 2.0% with the oil sector growing at 0.8% and non-oil sector growing by 3.6% per annum. This is good news as the private sector especially non-oil can absorb more people joining the workforce every year. But is 2.0% per annum good enough? If our population grows at around 2.1% per annum, then again we will face problems in the future regardless of how high our GDP per capita is currently.
I wouldn’t rejoice too much that our GDP per capita has allowed us to leapfrog over several countries and make us ‘richer’ than some others. Though it does give us bragging rights and we also know our places in the pecking order of the world's economies at least in relative terms. But at the end of the day, what is important is that the expansion of the size of the economy matters much more as the bigger the growth the economy, the more it is able to absorb the growth in the population and hence the better the future for our children.