Kedai Tutup
The change in temperature from -5 celsius in Seoul at 6 am and at 3 pm, it is 35 celsius in Singapore was something I could do without. But it is something we have to go through in conducting our official businesses. Here I am typing this in sunny Singapore and by the time most of you read this, I would have been back in my office scrambling trying to finish my work as I will be away on leave again on Monday and I have to rush to Lumut this evening for my cousin's bersanding ceremony. Yesterday, I went to my usual food place Nasi Padang at Scotts and found that it has gone out of business and so was the Indian food place in the next stall. My colleague said these two have closed for a while now. What happened to the Malay/Muslim food business in Singapore? Even the Malay food stall at the foodcourt in Terminal 2 at Changi Airport was the only one not open when we wanted to have breakfast there.
I was reading the BB this afternoon about how Brunei's Indian run shops are facing 'severe financial crunch' that many may shut their shops down and go home. BB argues that this is a result of 'depressed economic conditions' which I thought was a little bit on the scaremongering side. This is especially so when JPKE has indicated that over the last two years, the growth of non-oil GDP was in the region of about 4% annually, and therefore to blame the economic conditions totally would not be at all accurate. However to its credit, the article did point out towards the end that it is also the change in shopping habits brought about by the emergence of large supermarkets and department stores that many local kedai runcits are now heading towards extinction.
According to economic literature, changes in the 'kedai runcits' known as mom and pops stores in America and local grocers in England have been well studied. It doesn’t take a lot of people to switch from local shops to supermarkets, just a critical mass is sufficient to render the local shops or 'kedai runcits' unprofitable. This has been well documented by the New Economics Foundation’s series of reports on the emergence of “Ghost Town Britain” - a loss of just 10-20% of trade after the arrival of an out of town supermarket is enough to start shutting shops, despite the vast majority of local people actively supporting them.
I don't normally go to the 'kedai runcits' preferring the more modern supermarkets where there are lots of choices and better prices. So I am not one to worry about the loss of the local Indian run groceries stores. In the wider context though, maybe a study should be made at least to determine the cost to the economy. The local shops employ local people and they also rent houses and plots of lands from the owners for the operation of that business and obviously the owners do use the proceeds to gain more economic benefits and this will percolate and circulate to the rest of the economy. There will be losses with the shutting down of local groceries stores but the effect is currently unknown. There may be gains by having only large supermarkets providing even cheaper prices as they gain by having large economies of scale as well as bigger purchasing power thus enabling price savings and benefits to the consuemers. But again this would have to be determined.
Closing down of shops is not unique to Brunei. Businesses open and closed all the time. I don't have the data for Brunei but as an example in UK, in 1999 - 172,000 business closed down and 178,500 business newly registered, in 2000 it was 177,000 and 183,300 respectively. It is a problem, if they all closed down at more or less the same time. If any business closed down and there is a replacement, then there is not much to worry about. However if the business is not replaced, then that is a much bigger worry. New businesses always try to be better than the old one. At the same time, it also very much depends on what kind of business it is. Someone asked on the chatter box that question and I always say, it is like 4 blind men 'looking' at an elephant by touching the different parts of the elephant. Each will be describing the different parts of the elephant. To generalise the description of the elephant based on one blind man's description would be inaccurate. Similarly to generalise the state of the economy based on only one sector of the economy would be inaccurate too.
I was reading the BB this afternoon about how Brunei's Indian run shops are facing 'severe financial crunch' that many may shut their shops down and go home. BB argues that this is a result of 'depressed economic conditions' which I thought was a little bit on the scaremongering side. This is especially so when JPKE has indicated that over the last two years, the growth of non-oil GDP was in the region of about 4% annually, and therefore to blame the economic conditions totally would not be at all accurate. However to its credit, the article did point out towards the end that it is also the change in shopping habits brought about by the emergence of large supermarkets and department stores that many local kedai runcits are now heading towards extinction.According to economic literature, changes in the 'kedai runcits' known as mom and pops stores in America and local grocers in England have been well studied. It doesn’t take a lot of people to switch from local shops to supermarkets, just a critical mass is sufficient to render the local shops or 'kedai runcits' unprofitable. This has been well documented by the New Economics Foundation’s series of reports on the emergence of “Ghost Town Britain” - a loss of just 10-20% of trade after the arrival of an out of town supermarket is enough to start shutting shops, despite the vast majority of local people actively supporting them.
I don't normally go to the 'kedai runcits' preferring the more modern supermarkets where there are lots of choices and better prices. So I am not one to worry about the loss of the local Indian run groceries stores. In the wider context though, maybe a study should be made at least to determine the cost to the economy. The local shops employ local people and they also rent houses and plots of lands from the owners for the operation of that business and obviously the owners do use the proceeds to gain more economic benefits and this will percolate and circulate to the rest of the economy. There will be losses with the shutting down of local groceries stores but the effect is currently unknown. There may be gains by having only large supermarkets providing even cheaper prices as they gain by having large economies of scale as well as bigger purchasing power thus enabling price savings and benefits to the consuemers. But again this would have to be determined.
Closing down of shops is not unique to Brunei. Businesses open and closed all the time. I don't have the data for Brunei but as an example in UK, in 1999 - 172,000 business closed down and 178,500 business newly registered, in 2000 it was 177,000 and 183,300 respectively. It is a problem, if they all closed down at more or less the same time. If any business closed down and there is a replacement, then there is not much to worry about. However if the business is not replaced, then that is a much bigger worry. New businesses always try to be better than the old one. At the same time, it also very much depends on what kind of business it is. Someone asked on the chatter box that question and I always say, it is like 4 blind men 'looking' at an elephant by touching the different parts of the elephant. Each will be describing the different parts of the elephant. To generalise the description of the elephant based on one blind man's description would be inaccurate. Similarly to generalise the state of the economy based on only one sector of the economy would be inaccurate too.
Comments
"Hasty generalization, also known as fallacy of insufficient statistics, fallacy of insufficient sample, fallacy of the lonely fact, leaping to a conclusion, hasty induction, law of small numbers, unrepresentative sample or secundum quid, is the logical fallacy of reaching an inductive generalization based on too little evidence." (Wikipedia)
Two articles in the BB written by the same author regarding the Brunei Darussalam's economy, one on closure of restaurants and the other on the closure of kedai runcit clearly falls into this category of fallacy of hasty generalization. As BR has rightly pointed out that its a bit of scaremongering. I am pretty sure, JPKE as an institution that monitor Brunei Darussalam's economy as a whole, has all the information to allay the "fear" that the writer has posed upon us. The latest edition of their economic bulletin showed some decent figures on economic growth, money supply growth, loans for both consumption and productive purposes, imports, construction and even job openings in the non-oil private sector. There is no such thing as "recession".
In an open and competitive environment, exit and entry is nothing unusual (so says the theory of perfect competition).There will be some that will be able to stand the weather. One has to see the issue in a different perspective especially with regard to the kedai tutup. The kedai runcit as we are all well aware of are small in many respects. (Sometimes I tend to call these as micro enterprises rather than small.) If one or two of them closed down that will pose no significant impact on the economy. Yes there will be impact on land and house owners in terms of their lost income and to some extent loss of jobs. There are about 6 or seven kedai runcits in my area and most of their employees are non-locals and only two employ local cashiers out of a total of about 50 or so employees!.
The other issue is the flow of expenditure or income. As the writer has correctly pointed out this could be due to the changing (maybe) preference of Bruneians to do their shopping under one roof. (Thats why you will observe people throng the Mall or other such places even when it is difficult to get parking spaces!) When considering the impact on the economy as a whole the expenditure flow model is simple enough to explain (and understand) that money being spent in larger shopping places such as the Mall in the expense of the kedai runcit is only a question of redistributed expenditure or income. We spend by paying the goods that we bought to Hua Ho, for example, and Hua Ho gets the money as income instead of the Kedai runcit. There is no leakage out of the economy and there will surely be multiplier effects on the economy. On the question of leakage, of course one has to consider imports and investment and the large number of Bruneians who do cross-border shopping.
Congrats to BR for bringing up the BB articles in his blog.
Please see the reporting by BB as something to take heed. Talk to businesses and find out the truth instead of saying everythings OK from the comforts of your desk in your confortable office. Please take the trouble.
Maybe its a cyclical downturn. But take a closer look and maybe one might notice a downward trend. Certainly people are struggling now. Nobody has much spare cash anymore. Our businesses in Brunei dont much export and so they rely on people in Brunei having cash to spend.
Anyway i agree that something has to be done. Either the government really go out and find out the real state of the economy, or those successful businesses speak up ( i still have yet to find a positive note from my businessmen friends).
btw did u notice the 'stagnant economy' comment that Shazali said during the recent Asia Inc forum? not good..
abruneilifer.blogspot.com
No matter how much I try to be creative in my business, improving my products ..but to get the money out from the customer's wallet to mine is sooo darn difficult..cos maybe the customer might not have any money in their wallets at all. Sure alot of people throng to Gadong and the Mall..but..do some statistics..see how many people are really spending..or just 'lepaking'?
These are hard times people. It is NOW. What were discussed in meetings or in forums years ago are still being discussed now. When will the action be taken? How long do we wait? ...and wait?...and wait..and wait... wait...