In light of Ku Li’s speech that Malaysia is an ‘oil cursed” country, I would like to repost an old article of mine published in july 2007, and posted in both Malaysiakini (here) as ‘Beware of the oil curse” and my blog. I am glad that the prince thinks alone the same line as me, a small fry trying to be heard..:)
This is the article:
The curse of oil
July 16th 2007
There is an old saying by Lao Tzu that “Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime”. This is indeed very true in everyday life.
Many of the super rich families find that often their estate cannot survive the third generation.
The first generation often started as poor working people, but through sheer hardwork and thriftiness became rich. From being rich, many of them became super rich with good entrepreneur skills and good judgement. Many of them remained thrifty even when they became very rich.
The second generation often grew up during the time their parents were struggling to make their fortune, but when they were older, their parents had already made the cut. They were often better educated, and many were taught by their parents on how to “fish’. So when the fortune passed to their hands , many of them could still maintain the business and some , a minority of them, might even expand the business. They were , of course, less thrifty than their parents, and often married a spouse also from a rich family.
However, the third generations were usually born with the silver spoons in their mouths. They were brought up in a life of luxury, and were given expensive ‘fish’ to eat every day . Often, they were not taught how to fish. Many of them were educated overseas, but many of them just fooled around and lived a life of luxury. They were given everything, and because of that , they did not really know how to cope with difficult situations, and the intricacy of the business world.
Many of them also became big time gamblers and womanisers.
Adding to that, the family wealth inevitably got diluted among the more numerous siblings in the 2nd and 3rd generations, especially when these generations were unable to do much to expand the family businesses.
The wealth that were passed down just withered away.
This is known as the curse of the third generation.
I am talking about this curse because there is another curse which works in the similar manner but affect a country rather than a family.
Thomas Friedman, in his book “The world is flat”, talks about the “curse of oil”.
Many of us would have thought that a nation with petroleum resources would be a lucky and blessed nation.
Oil makes the rulers of some of these oil producing countries super-rich.
However, Friedman mentions that in countries like Venezuela, Nigeria, Saudi Arabia and Iran, the presence of oil in fact is the main retarding factor on the emergence of democracy and a diverse economy. He is of the view that the rulers of these countries use oil money to monopolise all the instruments of the state, including the army, the police and the intelligence.
They don’t need to be transparent because they don’t tax their people, and when they don’t tax their people, they don’t need to be accountable on how they spend the money. There is often no freedom of the press.
Oil money will eventually run out. Because of the short term wealth ( oil is short term wealth as in history , a hundred years is considered a short duration), they are like the third generation rich men mentioned above.
The rulers don’t bother to develop their economy just like the 3rd generation that don’t bother to learn how to fish. They don’t bother to develop their human resources , drills for natural talents instead of oil, train their people instead of importing trained people from other countries to work for them. Eventually, when their oil runs out, they will find that they cannot compete with much of the world that depends on their human resources instead of natural resources.
In other words, they don’t bother to let their people learn how to fish, and when their supply of fish is exhausted, they will be in trouble.
Bahrain was one of the gulf States to find oil first and also one of the first to finish its oil resources. It is also an exception to the “curse of the oil”‘. It is the first to have free elections , in which women are allowed to vote. It is also the first to sign an FTA with USA and the first to develop its own labour market.
It is able to do so because it finishes its oil money before other gulf states, and the people there knew that they cannot depend on the oil revenue forever and hence the development of democracy and free trade treaties.
We are also a small oil producer. We are lucky in that we have already been independent and already has all the democratic institution in place before we discovered oil. Our economy is also very much diversified; we have an Independent internet paper ( Malaysiakini ); we are a workble democracy with regular elections ; we have opposition parties; we have a fairly vocal NGOs.
We have not been afflicted with the curse of oil, so far. ( Editor 2009: In hindsight, I would say, we have already been inflicted with the curse)
However, our oil revenue has become increasingly important as a form of government revenue.. Last month, Petronas, our national oil company, announced a record revenue of RM 184.1 Billiobn and a pretax profit of RM76 billion for the financial year ending March 2007.
Taxes and royalties from oil and gas now amounted to about 35% of our government revenue, up from 10% a decade ago.
This revenue must be utilised with utmost care because oil & gas revenue is a depletable income; it will end one day and that day may be quite soon. It should not be wasted on non productive expenditure such as building offices and other non productive hardware, or in the rescue of failed state or certain private enterprises.
It should be used for developing our human resources, train our people and prepare them for the challenges ahead. It should be utilised for those infrastructure that will spur the expansion of our economy.
Human resources development must be based on meritocratic principles with assistance to the weaker and poorer sectors , irregardless of colour and religion. Only by doing so, with suitable amount of competition, we can develop fully our human resources.
We should not allow our people to be like the third generation rich mentioned above; we should not pamper our people too much but instead let them take on competition and develop their skills.
Only by letting our people learn how to fish in the best possible way , can we then avoid the curse of the oil and the curse of the third generation.
Otherwise, if we just sit around and refuse to learn how to fish, if we just pamper our people by giving them everything they need and take care of them from womb to tomb, the rot will inevitably set in.
We will then regret – and often it is too late – when our oil and gas supply ultimately runs out.