POWERS OF ATTORNEY – WORTH MILLIONS OF DOLLARS?

POWERS OF ATTORNEY – WORTH MILLIONS DOLLARS?

Many of us in the property business in Brunei are concerned to read that the government is abolishing the power of attorney used by some to invest in property in Brunei.

The 47,000 powers’ of attorney said to be implemented in Brunei represents a huge economic success story for the often struggling private sector of Brunei’s economy. The government says it wants and needs foreign investment. So how much foreign investment do these power of attorneys represent?

Let us assume that say, 20,000 of these powers of attorney are foreign held. I will mention later why some locals need to use a power of attorney.

If the value of the properties owned via these power of attorneys is only $250,000 per property, (and that is a very low estimate given the prices of Brunei properties), we are talking about $500,000,000 DOLLARS worth of investments that have been made in Brunei. And that is probably an under-estimate! What other sector of the private economy has had comparable success in attracting investment to Brunei?

The impact of abolishing powers of attorney upon investment in Brunei will be considerable. I have already had clients cancelling bookings for houses that they planned to buy here!

What does this mean for Brunei? A huge number of jobs are created by the building industry. All these shophouses or homes and the people living and working in them, need all the things that you need in your home! They need to eat at cafes or food courts; they need to buy food and clothes, motor cars and all the other products that so many businesses, employing Bruneians, supply to them. The amount of business and money involved is enormous. Is this economic success story about to be destroyed with an ill-considered stroke of the pen?

The Brunei government has billions of dollars in property investments in other countries. In addition, many of the super-rich in Brunei (and many of the less rich) have invested in overseas property. Shouldn’t we expect foreign governments to protect our investments? Especially when these investments are creating jobs and other benefits in those countries?

Over 95% of Brunei is still ‘State Land’, much of which is undeveloped, and given Brunei’s small population and the government’s commitment to ‘The Heart of Borneo’ ideal, it will remain so for a great many more generations. It would be well to remember that neighbouring Singapore is a lot smaller and very sensibly makes huge efforts to market its property to overseas investors. Again, they recognize that it is not just the sale of the property that creates wealth for Singaporeans, it is the goods and services that the residents will buy. The size and the value of the investments at risk in this instance are huge for a small economy.

The power of attorney is an incredibly useful tool; it would be well to recognize this before making any final decisions about its use.

Now, why do locals need to use a power of attorney? This question highlights the problems still caused by an unwieldy, outdated government bureaucracy that has never been properly overhauled by a succession of incumbent ministers.  In Brunei, it can take at least six months to transfer a piece of land from seller to buyer. That is if you are lucky! It may take a year; it may take as long as three years!

You can transfer ownership of a $100,000 motorcar in a couple of days, but a $50,000 piece of land may take a year. How long would the car dealers of Brunei stay in business if their customers had to wait a year to receive their new cars, and they had to wait a year to be paid? This is just one of the crippling conditions that we in the property industry have to live with!

What does this delay mean in real terms to the buyers and sellers of property in Brunei? I have known people desperate to sell land because they needed money urgently, perhaps to pay for their children’s overseas education, or tragically, because they need expensive overseas medical treatment. They cannot get the money because it can take so long for the sales process to complete. A power of attorney can, quite literally, be a lifesaver.

So, many local people use a power of attorney because they need the money quickly. Others because they want to start building their homes without the long delay involved in transferring land from owner to buyer.

There is yet another reason why so many local people use a power of attorney. You may be Malay, you may have been born here, you may have a yellow i.c., but maybe you are not ‘rakyat jati’. And you may be prohibited from buying land that is reserved for those who are ‘rakyat jati’. I have yet to meet anyone who thought that this was a bright idea. It is a relic of a bygone age and it creates divisions in the nation instead of creating harmony.

The land office tells me that they can transfer land in one week. So why does it take so long? All applications go before The Sultan in Council Committee for further scrutiny before permission is given for the land to be finally transferred. That is the reason there is so much delay. This would be understandable if this scrutiny only applied to land sales of more than say, 50 or more acres. But everyday land sales of a few acres or so, or small pieces of land of less than an acre, should not subjected to this kind of delay. It creates real hardship for many Bruneians. In fact, it should be possible for land transfers to take place on the spot. In the age of e-government with all properties on computer, if both parties present themselves at the land office with a sale and purchase agreement, ownership can be changed at once. Again, in much the same way that ownership of a motorcar is changed.

Brunei is struggling with a bureaucracy still rooted in the early 20^th century, but we are living in the early 21^st  century. A thorough overhaul of the system is long overdue and would be a huge benefit to business, the people and the nation.