Headline: Brunei: From Oil Rich to Garage Sales

Source: New York Times, 17 August 2001

URL: http://www.nytimes.com/2001/08/17/international/17BRUN.html

[Wonder what happened to all the money paid for the petroleum used by the West during the Age of Oil? Here’s one answer.]

BANDAR SERI BEGAWAN, Brunei, Aug. 16 — It might seem hard to fritter away $15 billion, but apparently with a little perseverance, there's nothing to it.

With nobody seeming to notice, Prince Jefri Bolkiah, 48, favorite brother of the sultan of Brunei, shoveled away at the cash reserves of this tiny, oil-blessed sultanate for years until, two years ago, he got to the bottom. His formula: building palaces, apartment complexes and marinas; buying luxury hotels, thousands of cars and dozens of aircraft; and supporting a large, jet-setting retinue of wives, mistresses and 35 children.

[PHOTO: Prince Jefri Bolkiah. The auction raised $7.8 million, but the prince's extravagances had managed to lose $15 billion.]

Hit hard by the Asian economic crisis in 1997, a drop in oil prices and now by Prince Jefri's extravagance, Brunei — head for head one of the most affluent nations in the world — is suddenly waking up from its swoon of abundance and wondering how it will support itself.

Even the most optimistic of its 330,000 citizens acknowledge that this little nation on the northwest edge of Borneo will never be the same. It is going to have to start working now to live in the real world, like other countries.

The saga of the profligate prince is just the latest cautionary tale about the dangers of an economic windfall. Among others, Nigeria, like Brunei, has been all but ruined by the corruption spawned by a discovery of oil.

Brunei's collapse was made explicit this week with a six-day auction of the depleted assets of the prince's construction and supply company, Amedeo Development Corporation, which went bankrupt in 1998. The auction of 10,000 items hardly made a dent, ending today with total sales of $7.8 million.

The scene was far from glamorous. Gathered in a cavernous plaster factory on the company's grounds, sweating bidders could hardly hear the auctioneer over the sound of huge fans as they picked apart what was left of Amedeo.

Others were led around the company's grounds by auctioneers, buying huge pallets of teak and mahogany and a state-of-the-art marble factory along with its inventory of 8,000 tons of fine marble slabs.

"This is clearly a bit hilarious," said Ignatius Stephen, director of BruDirect.com, a local Internet magazine, "the mighty affairs of Prince Jefri ending up in a plaster factory."

But by now, such a scene was no surprise. "It's all been a bubble," Mr. Stephen said. "It's so depressing. Everything in the country is run down. People are living on borrowed money, and that bubble is going to burst too, sooner or later."

On sale were the fixings of the luxury homes, apartment towers, shopping centers and yet one more palace that now stand half finished in huge cleared swaths of jungle. Everything from crystal chandeliers and gold-trimmed Jacuzzis to pizza ovens and gym equipment was up for grabs.

For Bruneians, the scandal has been an eye-opener. For decades they have lived comfortably on the crumbs from the sultan's fortune, enjoying free education, medical care and amusement parks, as well as high employment in the oil and gas industry and in the prince's projects. Nobody paid taxes.

In exchange, they were happy to let the royal family indulge itself with polo and parties, race horses, yachts and hundreds of Rolls-Royces and a constant stream of visiting starlets and beauty queens. The prince built a gigantic hospital catering mostly to the royals, as well as a modern sports stadium, a convention center and a $1 billion hotel and resort.

The family owns the Bel-Air Hotel in Los Angeles, the Dorchester Hotel in London and the Plaza Athénée Hotel in Paris.

Until the recent economic crash, Sultan Hassanal Bolkiah, 54, was rated as the world's richest person, with a personal fortune estimated at more than $40 billion. That may have shrunk by as much as three-fourths.

A decades-long state of emergency kept the population in its place, and it was a criminal offense to disclose information about the scope and management of the royal fortune.

As a result, most people now look on in wide-eyed silence. Everybody knew that the sultan had delegated financial management to the prince, giving him the dual positions of finance minister and head of the Brunei Investment Agency, which had the task of investing the huge oil wealth.

But only recently have they learned what he was doing with it. At the auction, Bruneians who had never been allowed inside his palaces and playgrounds had a chance to view their anatomy. There were mounds of baubles from the London jeweler Aspreys, gold-plated toilet brushes, a 12-foot-high bronze rocking horse, two antique cannons, fine china bearing the royal seal, the machinery to operate a bowling alley and an inventory of grand pianos.

But those were just the fun things. Palaces and resorts are not just marble and mirrors. The auction was an inventory of the nuts and bolts of the high life. There were waste paper baskets in bulk, water tanks, compressors, dry cleaning units, floor polishers, lampshades, ashtrays, electric saws, office equipment and bathtubs.Three snooker tables went for $7,060, a 21-foot-long dining table for $20,000, a Fuji photo processing laboratory for $10,000, a shed full of toilet bowls and pipes for $1,176.

[PHOTO: Brunei's economic collapse was made explicit with an auction of Prince Jefri Bolkiah's depleted assets, which included gold-plated toilet-bowl brushes.]

As the auction ended, two Mercedes fire engines, a trove of chandeliers and ornamental lampposts and simulators for a Comanche attack helicopter, an Airbus A340 and a Formula One racing car were still available through private tenders. When asked, the auctioneers said they had no idea what Prince Jefri intended to do with the simulators.

Once upon a time, hundreds of years ago, Brunei was a powerful nation, controlling much of Borneo as well as the Philippines. The sultan is the scion of one of the world's oldest continually reigning monarchies, dating back almost 600 years. Oil was discovered in the 1920's, and when Brunei became independent from a century of British rule in 1984, it was ready — financially if not politically — to fend for itself. Mostly it sat back and let specialists from Royal Dutch/Shell Group extract the wealth — some 350,000 barrels of oil and natural-gas equivalent a day — and pass on the profits.

Brunei's scandal is in one way a family dispute, brother against brother. Like many such disputes, the catalyst is money, on a very grand scale. Early last year, the sultan sued his brother and impounded his passport. Three months later, they settled, with the prince promising to give back all his assets and agreeing to live on a monthly allowance of $300,000. He had told a court that he really needed $500,000 to maintain his living standards.

He is not here in Brunei now to witness the dismantling of his corporation. He has chosen to spend his allowance in London and Paris, where he has not spoken publicly about his comedown.

The country he has left behind is now trying to put itself back together in a new form. Last year a government commission issued a dim assessment of the future. "There are warning signals of fundamental economic problems which threaten to undermine the prosperity and with it the social stability enjoyed by the people of Brunei," it said.

Putting into formal language what everybody now knows, it warned that continued prosperity "can no longer be taken for granted."

-- Andre Weltman (aweltman@state.pa.us), August 17, 2001