Small Enterprise Development and the 'Dutch Disease' in a Small Economy: The Case of Brunei

Abstract

Following hydrocarbon (oil/gas) discoveries and price rises, a number of small developing economies which had been relatively poor found themselves to be relatively wealthy. However, the existence of significant quantities of minerals with strong export potential has generally been seen as a mixed blessing for national development. All of these small economies have thus adopted conscious policies of diversification aimed at increasing the economic contribution of other sectors. Initial diversification strategies focused mainly on the development of large enterprises. More recently, though, these economies have begun to take a greater interest in small enterprises. This has chimed with growing recognition of the potential impact these enterprises can have on factors such as employment and income generation, income distribution, and technical innovation. This paper therefore investigates issues relating to small enterprise development in small, rich economies, choosing the case of Brunei as the main example for discussion. The material presented derives from a research study conducted from 1995 to 1997, including fieldwork and a survey of enterprises in Brunei. Following the introduction, the paper is divided into five main sections. In the first, some of the benefits and costs of a bobming minerals export sector are summarised. In the second, typical responses (in the form of so-called "resource-based industrialisation" and other large-scale initiatives) are investigated; and the need for small enterprise-based diversification is argued. In the third, the state of small enterprise development in Brunei is described. The fourth section analyses the current constraints to the creation and expansion of small firms in Brunei, particularly those constraints that relate to the economic domination of hydrocarbons in a small economy. Finally, conclusions are drawn about the future of small enterprise-based diversification strategies in this small economy.

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