Q & A: How the oil price situation affects every Bruneian & what to do about it

(Update: Found this very apt cartoon by Cuboi which will decorate the top of this post nicely. Haven’t gotten round to writing anything new yet this week, but rest assured the next one won’t be Brunei, oil price, news related! Enough about that for now.)

FullSizeRender (1)
Cuboi Art

Ten questions and answers – ready, set, go!

Q1: How does the low oil price affect Brunei as a country?

Since oil and gas revenue make up 95% of the country’s “salary”, a drop in oil price means Brunei is suffering from a massive pay cut (potong gaji 70%).

Q2: Oh, Brunei has a salary?

Yes, the fancy term for it is government revenue.

Q3: What is this government revenue used for?

At minimum, to keep the country running. It is injected back into the country to sustain the welfare system, i.e. it pays for free healthcare, free education, fuel and food subsidies, etc. It pays for a huge range of basic necessities, which include:

  • Salaries for RIPAS doctors’, paramedics, nurses, hospital staff
  • Salaries for school teachers and university lecturers
  • Salaries for police, military, fire fighters
  • In fact, all the government servants’ salaries – gaji everyone yang kerja government
  • Roadworks and bridge construction
  • Air-conditioning, electricity and water bills in government buildings and schools
  • Water treatment to ensure all homes have a clean water supply
  • Lighting all the streetlamps on all the roads and dark corners at night

At best (and especially when there’s a lot of money to go around, a.k.a. surplus) this revenue is also used towards expansion, for example:

  • Employment of more people
  • Generous education scholarships
  • Sponsoring participants at international conferences, programs
  • Building more roads, schools, buildings, water pipes, internet cables
  • “Diversification” – setting up new government-linked businesses, investments into non-oil and gas areas such as agriculture, manufacturing, telecommunications

Q4: Woaw, that’s a lot of stuff. How much does the government spend on all this (a.k.a. total expenditure)?

From about 2009 to 2013, the Brunei government spent between 6.4 – 7.5 billion a year in total (IMF Statistical Appendix, Brunei, June 2015). In 2014, government spending amounted to approximately 7.3 billion (JPKE BDKI Release 1 2015). For the financial year of 2015, Brunei projected a budget on the lower end of this range – 6.4 billion – for government spending, but it’s quite clear that actual expenditure might burst the budget and end up being a lot higher.

Q5: Brunei must earn a HUGE amount of money though right, definitely more than 7 billion a year, to be able to pay for all this?

Well… We did for a little while.

This is where I have to take you on a roller-coaster ride through the big, fat messy chart I slapped together in about fifteen minutes (before I spent a disproportionate amount of time tweaking colours and making other pedantic adjustments, you’re welcome). After all, nobody likes looking at tables full of numbers right?

A quick guide before you dive in:
The green bars are revenuehow much the government earns in that financial year
The red bars are expenditurehow much the government spends in that same year
The pink line is the oil price trend.
Observe: Because oil and also gas (which is linked to the price of oil) account for over 90% of the country’s revenue, even a small change in oil price (pink line) will have huge impacts on the total revenue.
So for example, oil price was at an amazing high from 2011 to 2012, at over USD $100/bbl. Those same years, our revenue was massive. However, when the pink dots are lower, the green bars are shorter too – take a look.

It’s important to realize that there is a very direct relationship between the oil price and the country’s revenue.

MynsDeskBruneiChart

 

Note: FY 2013 is not included because I wasn’t able to find the complete data for that year. FY 2014 data (based on JPKE BDKI) is likely inaccurate. See more details at the bottom of this post for full details on assumptions and data used.**

Confusing? Whoops. Let’s look at this complicated chart a little more closely. For each year, there are three nuggets of information – revenue, expenses, and the average oil price for that year (the y-axis is on the right). Let’s look at 2010 as an example. Revenue is approximately 9 billion, expenses roughly 6 billion, and the average oil price that year was USD 80/bbl. Got it?

The ticks and crosses at the bottom of the chart indicate whether revenue is greater than expenses in that year. Between 2010 and 2013, our balance sheets were in the green (tick!) – nice and healthy, living within our means and not incurring a deficit. (Note: While it’s not shown in the chart, Brunei did in fact incur a deficit in FY 2014 of 213 million; please see detailed notes at the bottom of the page for an explanation)

On the other hand, a big X mark shows that there was a deficit in that year. A deficit literally means “not having enough of something”, and when we’re talking about a government budget deficit, it means spending more than you actual make (i.e. expenses > revenue). So where does the additional money to compensate for the shortfall come from? For a regular person or even the government, this could imply having to resort to either dipping into cash reserves (equivalent to an emergency cushion) or taking out a loan and getting into debt.

You’ll notice we incurred a small deficit in 2009 (specifically, 250 million); this was the aftermath of the 2008 recession when oil prices momentarily dropped. However, the following year the oil price rebounded and we were seeing USD $100, $120 per barrel prices – and Brunei rejoiced and rolled around in the extra oil bounty. Our revenue practically doubled between 2009 to 2011; from 6.4 billion to a whopping 13 billion windfall!

Let’s zoom into where we are right now:

smaller2

Remember this headline? In March 2015, it was announced that “Brunei is expected to run into a deficit of $2.28 billion for FY 2015″ – social media and the newspapers had a field day. That’s what you see in the yellow box (government projection). According to the numbers released, revenue for 2015 is projected to be 4.117 billion, and expenses (if they stay within the budget) at 6.4 billion. Hence, the “2.28 billion deficit” is the height difference between the green bar and the red bar, and you only get a deficit if the red bar is taller.

Important disclaimer! The orange 2016 forecast box is strictly my own personal opinion, so don’t quote it as fact. Boring explanation: To make the projection as accurate as possible, I first assume spending will only decrease by a little bit. As I mentioned earlier, between 2009-2014 total expenditure hovered around 6.4 – 7.3 billion, so I’ve made the very conservative assumption that spending will be 6 billion in 2016. And revenue? I did some very quick number crunching on the historical data, and assuming an average oil price of USD $30/bbl for 2016 (which is the industry outlook right now) – revenue will drop even further from the current estimated 4.1 billion in 2015 (which was likely based on a $50 oil price)… To 3 billion in 2016. And if those rough estimates are anything close to accurate, we’d be looking at a budget deficit of at least 3 billion in the financial year of 2016. Like I said – don’t quote this as a fact; this is my view, my analysis, and I’m not the Minister of Finance so keep calm and don’t misquote or make up lies on whatsapp.

Q6: What does this deficit really mean?

Well, because expenditure will be more than revenue, the additional 2.28 billion (or in the future, 3 billion?) required will have to come from somewhere – either from the national cash reserves (“savings”), or in the form of external financing (a loan). However, that’s assuming you need to spend all of the 6.4 billion budget allocation.

Another more prudent way to tackle the deficit problem is to do the obvious: tighten the purse strings and reduce spending. The height difference between the green bar and the red bar? Make it smaller; if possible, close it. Tough times call for tough measures, right? And reducing spending is undoubtedly one of the first things the government is unfortunately now forced to look into.

Q7: How will spending be reduced? Is that the only way?

Scroll all the way up to Question 3. That whole list? It needs cost optimizing, cost cutting, cost reduction. We need to save and cut expenses! The budget for all the ministries may shrink – so if, for example, the Development budget shrinks: less road construction, delayed highway projects, maybe the potholes on the road won’t get fixed as quickly anymore? Calls are made for the public to save water to help the government save on the cost of treatment. Unlimited scholarships? Impossible! Education scholarships might be capped, depending on the budget. The public needs to be more aware of the value of energy and move away from the “subsidy mindset.”

In fact, only last month the second finance Minister said, point-blank, that the public must accept the fact that the government’s capacity to spend money will be limited and the mindset of relying on government’s assistance and initiatives must be replaced with hard work and independence.

This is a vast departure from the usual diplomatic sugar-coating, panic-suppressing, and tiptoeing on eggshells, which was still very evident a year ago when the oil price drop was apparently “no cause for alarm”.

But cutting expenses is only one side of the coin – the other is to look towards increasing incomeThe oil and gas industry makes up over 90% of the revenue, and it’s obvious we can’t rely solely on that anymore. The additional 10% of revenue? We have to pump it up like a flat tyre and make it stretch as wide as we possibly can; suddenly, every bit counts. Overdue building taxes that was just spare change and peanuts before? Collect those overdue payments now!  What about corporate tax? In 2014, only 1 in 3 companies actually filed their tax returns – not long after, court action was taken against a number of non-compliant companies.

Q8: Will these measures work? What’s the worst case scenario? 

Well, I suppose like Oman, Bahrain, and Saudi Arabia – Brunei could cut fuel subsidies.

Things that used to be free might not be so free anymore.

And did you know that almost 2 billion dollars goes to paying civil servants’ salaries every year? That’s approximately one-third (33%) of the total expenditure. (Source: IMF – btw, yes the data is all in there. If you’re too malas to skim the document and really want to verify where exactly in the report I’m getting this data, ask me in the comments. Otherwise, cari sendiri!) 

Paying for goverment workers takes up a lot of money. Worst case scenario? Step one is to freeze recruitment. No more new hires, no more job vacancies, no more adding to the 2 billion dollar mega payroll.

Step two… Well, unfortunately you’ll have to use your imagination. Salary cut for everyone? Retrenchment, letting people go, buang kerja? Which one would be the lesser of two evils – ask yourself. Option 1: Some people take a big hit and lose their jobs, or Option 2: everyone takes one for the team and settles for a pay cut. If you say Option 1 – how are you sure you won’t be one of the unlucky ones? It could be a big gamble. It’s scary to think about, isn’t it?

Q9: How will I be affected if I work in the oil and gas industry?

In fact, the oil and gas industry is probably the first to get hit – and it’s been getting pounded since the start of the price plummet. I won’t paste any links to news articles, because it’s fairly well-known: oil and gas companies worldwide have slashed tens of thousands of jobs. Budgets have shrunk, and then shrunk and shrunk again, big projects cancelled and/or delayed, mass lay-offs, company restructuring, mergers and acquisitions – e.g. Halliburton acquired/bought Baker Hughes. The industry has been left reeling and the collateral damage is widespread.

The closest to this epicentre of disaster are the service companies. That’s your Halliburtons, Schlumbergers, and all the bumiputera, local JV companies that have set up camp in Seria. Why? The domino effect. Low oil price means that the big oil companies like Shell, Total, PETRONAS, and globally – ExxonMobil, etc. – have to shrink their budgets, cut costs, delay and cancel projects. If there are no projects, the service companies have nobody to service – they have no work. And that’s why they’re called service companies – their work is to provide service. If services are not needed, and the company has no work? They don’t need workers. They lay off their staff. And that’s how service company employees are at the highest risk of being let go.

As the service companies start getting hit by layoffs, the Majors (big oil companies) are pushing more and more items onto the chopping block. Budget cuts mean tightened purses and cutting out the excess fat. Business travel restrictions, no more annual dinners, no bonus, no increment, black and white printing only, telecons and videocons, no meetings in external venues. Cost cutting, austerity measures abound; hopefully these initiatives will keep them afloat until the oil price rebounds and the money-pipes start flowing strong again.

But what if it’s a prolonged period of drought; cash dries up, oil price stays low, business stays sluggish. Then there’s the sensitive bit – slimming down the workforce. Normally the order of staff release is this: (1) contract staff will not get their contracts renewed, i.e. their contracts die a natural death and don’t get extended (2) the more expendable people will be released, usually the ones which have existing “strikes” against them – disciplinary issues, consistently low-performance, other valid reasons for release (3) redundancy; with work drying up, perhaps your role/job just isn’t really needed anymore, at least not for a while. And so on and so forth. This is a HR thing that’s practiced in general, not just the oil and gas industry. There are even things like voluntary resignation schemes, where people are encouraged to retire or resign – and may even be given an incentive to. It’s not shady business, this is just (work) life.

And these things are necessary – it’s not due to malicious intent and “not understanding that people have families.” If companies are struggling financially, is it wise for them to remain in denial, to pretend it’s business as usual, to not cut costs, and keep every single employee even if they can barely afford to pay their salaries? They’ll just end up crumbling under the weight of maintaining this false illusion and BOOP suddenly they’re bankrupt, now what? No more company, bye bye tutup kadai and then literally everyone who used to work there is out on the streets.

Times are tough and you, me, and companies need to do what needs to be done in order to stay afloat.

Q10: OH MY GOD THIS IS SO DEPRESSING, WHAT CAN I DO?!?!?

First thing, breathe.

Deep breath, in. Heeee. Now exhale slowly. Hooooo.

1: If you’re fortunate enough to not be one of the 10,000 registered jobseekers, don’t take your job and income for grantedRealize that the unemployment rate is actually much higher because the data JPKE has only covers the unemployed people who have registered (and renewed their status in the last year) as a jobseeker. If you are working, do not live and spend money under the false illusion that your monthly salary is a constant, never-ending stream of money that will sustain you until you’re 55. Wake up. Imagine no salary next month. Panic. Ok, stop – now calm down. Yes, that is the worst case scenario and chances are (insyallah) your job is safe, at least for the time-being. But break away from the illusion that your job and your salary are forever. Long gone are the days when you would land a job immediately after school, and then settle in for an easy goyang-kaki ride all the way to retirement.

2: Your debts are heavy anchors tied to your feet and if the water rises, these anchors will drag you down and prevent you from swimming up for air. Remember, as long as you have debt – you owe someone else, and this someone else has control over you. And every hour of every day you work, you are working for someone else – to pay back someone else. If there was ever a threat to your income, you would be trapped with an obligation to someone else, and someone else could come knocking on your door. Pay off your debts quickly, and avoid getting into any new debtsA debt is a deficit like we spoke about in Q5 and Q6 above. You need to close the gap between the green bar and the red bar and get yourself out of the pressure cooker. If you have no debts, you owe no one anything and nobody has a claim on you – except yourself. And every hour of every day you work is for you (and your family, and whoever you choose to work and live for).

3: Build an emergency cushion. Start saving up. If something bad were to ever happen, you’ll have something to cushion your fall and prevent absolute disaster. Stop living paycheck-to-paycheck; there is no guarantee your salary will be there forever.

4: Get your life and personal finances in order. Try to cut expenses, save money, look for alternative streams of income. Weigh risks carefully, don’t gamble all your money into risky investments or business ideas. Don’t “follow your dream” by quitting your job and praying that money will come. Become risk averse. Weigh your options. Make smart, well thought-out decisions. This economic climate is not the time to throw caution to the wind and hope for the best. Have a plan. Think before you buy. Question before you commit. Be a (wo)man. Do the right thing.

5: Be optimistic but stay realistic. Realize that money isn’t everything, it’s only a tool. But also realize that you need this tool, and you need to learn how to control it – never allow money to control you. Too much debt means money controls you. Not having an emergency fund when tragedy strikes means money can control you, and not having money can make people do very stupid things. A lack of money can make people do very unkind things, even heinous things. So it’s important to allow yourself to have enough money and live within your means and be content – and not materialistic, constantly chasing after insatiable and unlimited wants and desires – because contentedness gives us the room and ability to be generous, and it’s a wonderful feeling. Even people with the best intentions can fall on tough times, we need to try be compassionate, kind, and generous towards other people  and it’s very hard to do that when you’re struggling to make ends meet for yourself.

6: Realize that you’re fully in control. No, you can’t control fate and God and certain things may be written down and set in stone for you – but realize these things just determine your circumstancesHow you react to these circumstances and conduct yourself is fully your choice. Once upon a time, I had to learn that (financial) lesson the hard way. Don’t depend on anyone else except yourself. Where you are or what you’re experiencing right now may not be your fault, but you’re the only one who can get yourself out of it.

7: Be grateful but never satisfied. This cliche might sound paradoxical, but I think it’s important to be grateful for where you are and what you’ve got (even if you think it’s not much) – and don’t be so focused on the negatives, what you don’t have or lack. At the same time, always try to propel forwards in search of being the best version of yourself.

Times are tough, and it’s not worth deluding ourselves into thinking this will just magically make itself better. It’s important to be aware and stay educated, and know what’s coming so we can all prepare ourselves, individually, for the worst. Stand on your own two feet and try not to over-depend or over-burden others – you’re capable of far more than you’ll ever know. And we need to avoid falling into the downward cycle of finger-pointing and blame-gaming. It’s tough all around, and we owe it to ourselves to make sure we get by the best that we can. And yet, at the same time – don’t drag yourself down, don’t be too glum. Stay optimistic, and remember compassion, generosity, and kindness go a long way especially during challenging times like this.

 


**Boring disclaimer & detailed notes:

  • The data for FY 2014 was acquired by adding H1 + H2 2014 numbers in the JPKE BDKI Release 1, which likely causes inaccuracies as I assume this means Jan – June 2014 and July – Dec 2014; whereas I believe the IMF data is based on the FY of 1st April – 31st Mar which is what is used by government finance. For example, FY 2012 is 1 April 2012 to 31st March 2013 or more commonly seen as “FY 2012/2013”.
  • Furthermore, according to the “total revenue” and “total expenditure” numbers provided by JPKE BDKI for 2014, no deficit was incurred. However, according to Pehin Dato Abd Rahman, a deficit of BND 213 million was incurred for FY 2014/2015.
  • As of December 2015, Brunei has already registered a deficit of 1.6 billion for FY 2015 (out of the projected 2.282 billion).

What are fixed/term deposits and are they worth it?

fixeddepjg

Another possible savings vehicle which you could consider is the Fixed Deposit/Time Deposit/Term Deposit account. These are all just different names for the same thing: essentially, you lock up a specified amount of savings for a specified amount of time and no touchie.

The logic is that the bank can offer you better interest rates (compared to a normal savings account) if there is a guarantee you won’t touch the money within the specified term period. If you do decide to withdraw your cash and terminate the account before time is up and before the deposit matures, you would forfeit the profit.

Normally the minimum deposit amount is $1,000 and you can choose lock-up periods (i.e. term periods or “tenor”) ranging from 1 month to 3 years.

I checked all the websites for the major banks in Brunei and they all list this as a service they provide, but only BIBD and Baiduri have their details online, so you’d have to check at the counters for the others if you’re really interested. From the information that I’ve got, the offerings at BIBD and Baiduri are pretty much identical.

BIBD specifies that term periods of 3 months or longer require a minimum opening deposit of $1,000. However, if you’re super impatient and only want to lock-up for 1 month, then the minimum opening deposit is $5,000. You can choose a term period of 1, 3, 6, 9 months or 1, 2, 3 years. Baiduri states that their minimum deposit is $1,000, perhaps irrespective of tenor length, and you can choose 1, 3, 6, or 12 months.

Here are the rates for BIBD:

FDBIBD

Here are the rates for Baiduri:

FDbaiduri

Important! These rates are on a per annum basis, so you would have to (1) multiply your deposit amount by the rate listed above, (2) divide by 12 months, and then (3) multiply by your chosen term period (in months).

So for example, if you had $5,000 and you wanted to lock it up for one month, your profit would be

(1) $5,000 x 0.2/100%
(2) ÷ 12
(3) x 1 month

Or in one line, basically $5,000 x 0.2/100 ÷ 12 x 1 month = 83 cents SNORE.
So that’s really not worth your time, to be honest.
Personally, I don’t think anything less than one year is worth it.

Let’s see how much profit you could get locking up $1,000 for a year.
$1,000 x 0.75/100% ÷ 12 x 12 months = $7.50, that’s better!

If we compared this interest rate to the savings accounts, you would only be able to get 0.75% p.a. either with the Baiduri Multi-Tier Rate account (fine print: you would have to get your salary assigned to Baiduri, and apparently be a government, semi-government, or Shell-linked employee) or potentially a TAIB account (fine print: strictly profit sharing, no guarantee on the returns, depends how their financial performance is for that year).

So if for one reason or another, you’re not keen on the Baiduri Multi-Tier Rate or TAIB, a fixed/term/time deposit could be an alternative to consider.

The added benefit is that by committing to locking some of your savings up, you’re much less tempted to reach for it (unless it’s a real emergency and it’s worth foregoing the whole profit). In this way, a fixed deposit is good for extra discipline – almost like freezing your ATM card in a block of ice, except by the time the ice defrosts there’ll be a little bit more money in there than what you’d started with.

If you’re new to the concept, my advice is to start small and not over-commit. Don’t throw your entire savings into a fixed deposit, especially if the chances you’ll need it within a year are high. Remember, you can’t just “withdraw” a little bit – if you want a little bit, you have to terminate the whole thing.

So start small. If you can afford to scrape $1,000 off the top of your savings, then throw that into a fixed deposit for a year and just forget it exists. If you ever feel like you can afford to scrape another $1,000 away without missing it, then open up another fixed deposit account and throw that in.

Remember, there’s actually no real benefit to putting huge amounts into one account. The profit for a lump sum $5,000 for a period of one year is the same as five separate $1,000 accounts over the same length of time. There’s even this strategy/trick called a CD ladder (certificate of deposit – same thing, that’s what it’s called in the US) which you can Google.

Essentially you open up small-sized fixed deposits over a number of months so it becomes staggered, like steps on a ladder. For example, if you have $3,000 to deposit – don’t put it all into one account. This month you throw in $1,000. Then two months later, another $1,000. And then the following two months $1,000. So next year the accounts will mature every two months – so if you need any of it, chances are you’ll be able to access one that’s already matured and generated profit.

Like I mentioned in the last post, we’re not talking about striking gold and winning the lottery here. But we should all try to build up a decent savings – at minimum, as an emergency cushion – and if it’s just there sitting around, you might as well chuck it into a place where it can grow just a teeny-tiny bit bigger, just a teeny-tiny bit faster.

 

Which savings accounts offer the best interest rates in Brunei?

(Updated to include TAIB & Baiduri’s Multi-Tier offerings!)

 

savesbrunei2

 

A number of people have asked me which banks I use, where I keep my savings, do I have a debit card? A credit card? Is one savings account enough? Should you have accounts with more than one bank?

So let’s start talking about bank deposits and some of the different accounts available.

First of all, I think it’s important to draw the line between a general use account and a savings account.

A general use account is also known as a current account (in the UK) or a checking account (in the US). This is just a regular, ordinary, general whatever account where your salary/paycheck gets dropped in every month, and you can withdraw cash freely with no issues or restriction. It’s quite common to have a debit card attached to this type of account so you can access your funds more conveniently. So a general use account is essentially just a digital wallet: easy in, easy out. The primary benefits are safety and convenience, but interest rates are usually very low so you won’t get much return (or profit) from them – especially because your account balance tends to bounce up and down.

savings account, on the other hand, should actually be very different. I say should because based on some of my conversations, a lot of people see their general use accounts as their savings accounts too – they’re the “same thing”, and it’s just ONE mega account with both purposes lumped together.

But this isn’t an efficient way to do it at all.

A savings account should hold money that is much less accessible and not easy to spend. Since you’re saving for something (logically in the future, either short-, medium- or long-term; or your emergency fund) you should minimize the chances of “accidentally” overcharging your debit card and wiping all your savings out. It’s also harder to track and make sure you’re saving (and making sure your balance increases) if your account keeps fluctuating and bouncing up and down every time your salary comes in and your monthly spending money goes out.

It’s best to keep all the volatility confined to one account – the general use account – and have your savings sitting separately, somewhere much quieter and safer, where it has space to grow and you can actually monitor the growth without all the spending and over-activity being a distraction. Space to grow – that’s another important reason why savings accounts should be separate.

Savings accounts generally offer higher interest rates, and more opportunity for profit and return. We’re not talking get-rich-quick levels (as if there is such a thing!) but every little bit counts. I mean, if your money is going to just sit around and do nothing anyway, you might as well put it somewhere it can grow just a tiny bit bigger, a tiny bit faster. Since savings accounts are designed for savings, and not up-down-and-around general usage, there are some restrictions on withdrawals in order to benefit from the higher interest rate. For example, if you withdraw cash on a certain month, you may not get the profit for that month. But for every month you refrain from taking money out, you’ll benefit from the higher interest rate.

Since I’m such a good friend, I put together this helpful comparison of the most common accounts available in Brunei. A word of caution though – the interest rates offered in Brunei are pretty pathetic, but oh well!

bank5

The list above represents (in my opinion) the most commonly used banks in Brunei for general usage. Each bank will offer a default account for general usage (i.e. BIBD general, HSBC Statement Savings, Baiduri Savings, SCB JustOne Savings) when you open up a new account – and they all earn a teeny-tiny 0.15% interest.

The specific way the interest is calculated varies across banks, but as a general rule it’s a per annum rate, but divided across 12 months. So a rule of thumb is apply the interest rate to your end-of-month balance, and that’s what you might earn for that month. Just to clarify, a 0.15% rate is NOT 1.5% or 15%; it’s 0.15 of a percent! So when I say tiny I mean tiny. If you check your bank statement, chances are you only earn a few cents a month.

This rate is fine for a general use account. But like I said earlier, if you’re trying to save up and your money is just chilling out doing nothing for a while, you might as well put it somewhere it can earn just a little bit more!

The Tiered accounts (i.e. BIBD Tiered, Baiduri Multi-Tier Savings & Multi-Tier Rate) offer varying interest rates, depending on the amount of money in the account. The idea is the higher the balance, the higher the interest rate.

BIBD Tiered and Baiduri Multi-Tier are similar, but Baiduri offers comparitively better rates (in exchange for a higher minimum deposit and balance). BIBD doesn’t give details on the site, here are the Baiduri tiers:

If you already bank with Baiduri, or are willing to move your salary over, you could sign up for the Multi-Tier Rate Account, which has even better rates. The fine print is you have to have your paycheck assigned to the bank, and be a government, semi-government, or Shell-linked employee. But I have a feeling you could just give it a shot and try your luck even if you don’t meet the employment conditions; maybe they don’t really check?

bai
Baiduri Multi-Tier Rate

As you can see, simply upgrading your account or opening a new one (with a better interest rate) can easily give you more than double the default general accounts in all the other banks. It’s not winning the lottery but it’s still better than nothing, no?

If you had $1,000 in a general use account, you’d only get $1.50 a year. In a BIBD Easysaver (0.4%), that could be $4 a year. Sure, sure – peanuts right, so sekadar, luan jua kan bekira! But if you had $10,000, that would be a $15 vs $40. Still nothing, perhaps. But if you’re already an existing BIBD customer, it’ll take you literally ten minutes to open up a new account online, move your money, and then forget about it forever (until you need it). And transfers within the bank are free, and easy to do online. I’m sure the same applies to most of the other banks too. If you want to withdraw, that’s fine! Withdraw pulang. You only lose out on the interest for one month. Jangan saja withdraw every month, using it as frequently as you would a general use account would defeat the purpose.

At the end of the day, you might be thinking – it’s such a small difference, malas ku eh. But what if your employer asked you one day, hey buddy do you want a random, mini-salary raise of $4? Instead of, say, $2,000 per month I’ll give you $2,004 starting from today. You’d probably roll your eyes and think oh wow how generous, but you wouldn’t reject it and be like nah keep it – would you? And the tiny little increases have an important compounding effect (which we can talk about another time) so don’t be too quick to scoff.

TAIB is an outlier in the sense that it appears to operate on a strictly profit-sharing mechanism and doesn’t guarantee an interest/profit rate, unlike the rest of the banks on the list. Nevertheless, they do have great offerings, which appear to rival the rest:

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“The “Hibah” rates are only applicable for 2015 and the rates for ensuing years are subject to TAIB’s financial performance.”

Based on the information I could find on the site, the first account (Tekad Haji) is specific for Haj savings purposes while the second row (SiManja, Remaja, Belia, etc.) are age-specific accounts, e.g. Belia are for individuals between 22-30 years of age. I assume the default general-use account is the Biasa (normal) one, and it did very well at 0.65%. The approved profit-sharing rates shown in the table are based on 2015, and “the rates for ensuing years are subject to TAIB’s financial performance.”

So I suppose the trade-off for the higher potential interest rates is the risk is that these profits aren’t guaranteed – unlike BIBD which does guarantee a set profit rate under the umbrella of syariah-compliant banking.

Unfortunately, TAIB doesn’t have a great website so if you’re looking for more details, your best bet is to schedule a branch visit. The impression I get is that they’re not as commercial, consumer-bank-oriented as the other four – they seem to provide ATM cards, but no debit cards, limited cards rewards programs, and they don’t advertise or hold promotions/offers as much as the other banks. 

The only two other banks in Brunei which I haven’t mentioned are Maybank and RHB (both Malaysian banks) because they don’t have any information online beyond a “Brunei presence” page on their group websites. If you have any information with regards to their account offerings and interest rates, please let me know!

** Update: The RHB savings account also earns 0.15% interest!

On a final note – The BIBD Haj account (1% interest rate) and the TAIB Tekad Haji are accounts specifically for Haj/Umrah purposes and not just, y’know, saving up for a wedding or a Eurotrip. I guess you could just open up a Haj account at either one of these banks in order to take advantage of the best interest rates – I’m sure they don’t police you and track exactly what you use the money for – but that depends on where you draw your own ethical, moral line. I personally wouldn’t be comfortable using those accounts for non-Haj/Umrah purposes but that’s just my own preference.

Which bank(s) do you hold an account with? Do you know what your interest rates are?