Strong growth potential can curb unemployment: IMF

Azlan Othman

The International Monetary Fund (IMF) said that strong growth is essential to address youth unemployment, while structural labour market reforms can also help. Leveraging technology and digitalisation could help turn Brunei’s young and tech-savvy population into an asset.

This was highlighted in its recent report when the IMF Executive Board concluded the 2019 Article IV consultation with Brunei Darussalam.

According to the latest Brunei Labour Force Survey, youth unemployment has increased to 28.9 per cent. International experience shows that youth unemployment has significant economic and social consequences.

Large and persistent unemployment rates lead to skill attrition, depreciated human capital, outward migration of skilled labour, and an increase in social and political resistance to reforms.

Long-term youth unemployment can even erode social cohesion and institutions. For example, experience from other countries shows that there is a negative relationship between youth unemployment and trust in society.

Growth alone may not solve the youth unemployment problem. Labour market institutions become the centre of forces in addressing youth unemployment issues when economic recovery stabilises and when unemployment rate returns to historical averages.

Improving the business climate and fostering competition will be essential in reducing unemployment in the medium term and raising potential growth over the longer term. Policies should also focus on micro, small and medium enterprise (MSME) development, including capacity development and entrepreneurial training. Efforts are also needed to better integrate and generate stronger positive spillovers from the foreign direct investment (FDI) sector to the rest of the domestic economy.

Well-designed labour market institutions can enhance job prospects for both youth and adult Bruneians. Large government sectors may crowd out private investment and disincentivise employment for the private sector.

A large public sector may also inflate wage expectations and contribute to skill mismatches by influencing employment choices. If combined with higher public sector wages and better benefits, it may increase reservation wages. The authorities have taken many welcome initiatives to foster job opportunities and increasing job matching, including JobCentre Brunei, i-Ready, and the Centre for Capacity Building. Efforts should continue scaling up training programmes to address skill mismatch problems and better prepare people for future employment. These initiatives should be evaluated regularly to assess their effectiveness.

Automation and digital technology are taking over tasks that were once done by humans. It is therefore important for young people in this new era to be equipped with skill sets to face challenges and be more competitive in the job market.

On the other hand, technology also brings innovation and new opportunities, generating potentials for new jobs that give young people comparative advantages. Initiatives such as facilitating technological infrastructure and education programmes can help tackle youth unemployment, including life-learning programmes and increasing tertiary education enrollment.

Leveraging digitalisation, one of the five priority business clusters, to attract quality FDIs and build skills would be instrumental towards making young Bruneians competitive.

In January this year, the Department of Economic Planning and Development (JPKE) said that Brunei’s unemployment rate rose to 9.3 per cent in 2017 from 6.9 per cent in 2014.

The latest statistics, which were the findings from the Labour Force Survey 2017, puts the number of unemployed persons at 19,200, out of which 18,200 are locals. It also showed that there are more unemployed men than women at 52.1 per cent of males (10,008 persons) compared to 47.9 per cent (9,191 persons) of females. Among the unemployed, 28.4 per cent or 8,500 persons are youth aged 15 to 24.