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Brick manufacturers from Sabah and Sarawak are set to gain after the two biggest brickmakers in Brunei announced today that they have shut down due to unbearable government policies. In July 22, the Bruneian authorities suddenly and unexpectedly imposed a maximum price on clay bricks which will be enforced on August 1. Prices of clay bricks will be capped at 11 cents per brick for wholesale purchase while retail prices will be capped at 13 cents per brick, according to a statement from the Department of Economic Planning and Development (JPKE). Businesses will be fined a maximum of B$1,000 for each violation.





Brunei's pricing policy led to the demise of its two biggest brickmakers in 10 days



The industry says the government did not consult them before the decision, and that their production cost to make one brick is around 15 cents, so in effect the policy is asking them to sell at losses. Companies appealed to JPKE to reconsider its ruling, but were ignored. In light of this, a spokesperson from Hup Soon Brickworks and Ceramics Sdn Bhd, Brunei's biggest brickmaker, said the company had just finished selling off its existing stock and will be shutting down its operation. "We have stopped producing."



Right now, he said the company is waiting to see how the government will respond to manufacturers decision of shutting down. Hup Soon Brickworks and Ceramics Sdn Bhd supplies Brunei's construction market with some five million bricks a month. It is a local firm with more than 50 years of history. Meanwhile, Brunei's second biggest brick producer, PYP Holdings, also announced that it is halting its operation.





Self-inflicted damage caused Brunei now to face 8 million bricks shortage every month



A representative from PYP Holdings said the company has stopped taking in new orders. PYP makes at least three million bricks a month for the industry. "We are looking at how to cut cost before we start selling again, and we are wondering if that would be feasible or could actually be done. With this price cap, the brickmaking industry would be stagnated and it will not grow," he said, adding that all their so-called 'cost cutting' would be moving from losses to 'break even', with profits barely possible.



"We are disappointed that these prices had been set without talking to the local brick makers," the company representative added. "We would also like to know what is the basis for the current prices, as prices from neighbouring cities such as Miri and Kota Kinabalu range between RM0.45 (B$0.17) and RM0.50 (B$0.19), which are higher than ours. We believe that the prices before the August 1 price controls were fair. We also believe that the open market should decide what the price is, because if our prices had been too high, then the consumer could import instead from nearby countries."





The Sultan announced this week that the country's policies will now be based on religion



The government so far did not give a reason for its decision to impose price cap. Other smaller brickmaking companies had previously also indicated that the current price caps would put them out of business. The two brickmakers above together made up 0.6% of Brunei's manufacturing activities, not quite a big percentage but the effect on the construction industry would be felt. Construction accounts for 3.4% of Brunei's oil-dependent GDP.



With Hup Soon and PYP shutting down, Brunei would face a monthly shortage of 8 million bricks. The construction industry have expressed concern. In a phone interview with The Brunei Times, a contractor who wished to remain anonymous, said that he is fortunate to "lock in" an order for about eight million bricks before the ruling to help sustain his projects for about 18 months. He hoped that by that time the issue would have been resolved. He stated that on the surface, the price ceiling helps contractors, but if local producers are no longer be able to operate under it, it would be meaningless.





Brunei's construction sectors will be forced to buy from Sabah and Sarawak to cover shortages



The contractor said importing would raise issues on quality, transport costs as well as whether or not they would be cheaper anyways. "When we talk about bricks, there are two main materials. One is clay, the other is the energy in order to bake the clay. It makes no sense to pay other countries for the clay that is already available in Brunei, not to mention the price of energy is not as cheap as it is in Brunei." But with the shutdown, Brunei's construction industry will definitely be forced to buy from abroad, especially from neighboring Sabah and Sarawak.



Brick retailers are hesitant to sell existing stock of bricks at a loss. A spokesperson for Wei Aik Sdn Bhd, a retailer for construction and hardware goods, said they still have a small amount of bricks but are not selling at the moment. "We bought our stock at B$0.17 and we have been selling at B$0.19 (before August 1)," he said. "How would we sell at B$0.13?"





Brunei's Q1 2014 GDP declined by 3.3%, compared to Malaysia's growth of 6.2%



Brunei's GDP growth has been trailing behind not only other ASEAN states, but Asia overall. Economic growth in 2013 was -1.8%, compared to North Korea +1.1%. The quarter one (Q1) GDP performance this year was -3.3%, in contrast with Malaysia's robust +6.2% growth. Oil production is also on the decline. Brunei's total crude oil exports was B$476.8 million in May 2013, but it has dropped 17% to B$395.7 million in May 2014. This is despite that oil prices remain relatively constant in these periods. LNG (Natural gas) exports dropped 20% from the previous year.



It is another major blunder by the government of Brunei. The country established its own monetary authority in 2011. Since then it has been playing on interest rate policies without consulting the banking industry. After an interest rate readjustment in 2013, Citibank announced that it would pull out from Brunei effective April 2014 after over 40 years of presence. Other foreign banks such as HSBC and Standard Chartered are limiting services to consumer and corporate customers.





Brunei's interest rate policy caused Citibank to pull out the country in April 2014





> http://bt.com.bn/bookmarks-breaking/2014/0...fter-price-caps

> http://bt.com.bn/news-national/2014/08/02/...-due-price-caps

This is a news story continuation from Brunei brick industry may collapse totally Brick manufacturers from Sabah and Sarawak are set to gain after the two biggest brickmakers in Brunei announced today that they have shut down due to unbearable government policies. In July 22, the Bruneian authorities suddenly and unexpectedly imposed a maximum price on clay bricks which will be enforced on August 1. Prices of clay bricks will be capped at 11 cents per brick for wholesale purchase while retail prices will be capped at 13 cents per brick, according to a statement from the Department of Economic Planning and Development (JPKE). Businesses will be fined a maximum of B$1,000 for each violation.The industry says the government did not consult them before the decision, and that their production cost to make one brick is around 15 cents, so in effect the policy is asking them to sell at losses. Companies appealed to JPKE to reconsider its ruling, but were ignored. In light of this, a spokesperson from Hup Soon Brickworks and Ceramics Sdn Bhd, Brunei's biggest brickmaker, said the company had just finished selling off its existing stock and will be shutting down its operation. "We have stopped producing."Right now, he said the company is waiting to see how the government will respond to manufacturers decision of shutting down. Hup Soon Brickworks and Ceramics Sdn Bhd supplies Brunei's construction market with some five million bricks a month. It is a local firm with more than 50 years of history. Meanwhile, Brunei's second biggest brick producer, PYP Holdings, also announced that it is halting its operation.A representative from PYP Holdings said the company has stopped taking in new orders. PYP makes at least three million bricks a month for the industry. "We are looking at how to cut cost before we start selling again, and we are wondering if that would be feasible or could actually be done. With this price cap, the brickmaking industry would be stagnated and it will not grow," he said, adding that all their so-called 'cost cutting' would be moving from losses to 'break even', with profits barely possible."We are disappointed that these prices had been set without talking to the local brick makers," the company representative added. "We would also like to know what is the basis for the current prices, as prices from neighbouring cities such as Miri and Kota Kinabalu range between RM0.45 (B$0.17) and RM0.50 (B$0.19), which are higher than ours. We believe that the prices before the August 1 price controls were fair. We also believe that the open market should decide what the price is, because if our prices had been too high, then the consumer could import instead from nearby countries."The government so far did not give a reason for its decision to impose price cap. Other smaller brickmaking companies had previously also indicated that the current price caps would put them out of business. The two brickmakers above together made up 0.6% of Brunei's manufacturing activities, not quite a big percentage but the effect on the construction industry would be felt. Construction accounts for 3.4% of Brunei's oil-dependent GDP.With Hup Soon and PYP shutting down, Brunei would face a monthly shortage of 8 million bricks. The construction industry have expressed concern. In a phone interview with The Brunei Times, a contractor who wished to remain anonymous, said that he is fortunate to "lock in" an order for about eight million bricks before the ruling to help sustain his projects for about 18 months. He hoped that by that time the issue would have been resolved. He stated that on the surface, the price ceiling helps contractors, but if local producers are no longer be able to operate under it, it would be meaningless.The contractor said importing would raise issues on quality, transport costs as well as whether or not they would be cheaper anyways. "When we talk about bricks, there are two main materials. One is clay, the other is the energy in order to bake the clay. It makes no sense to pay other countries for the clay that is already available in Brunei, not to mention the price of energy is not as cheap as it is in Brunei." But with the shutdown, Brunei's construction industry will definitely be forced to buy from abroad, especially from neighboring Sabah and Sarawak.Brick retailers are hesitant to sell existing stock of bricks at a loss. A spokesperson for Wei Aik Sdn Bhd, a retailer for construction and hardware goods, said they still have a small amount of bricks but are not selling at the moment. "We bought our stock at B$0.17 and we have been selling at B$0.19 (before August 1)," he said. "How would we sell at B$0.13?"Brunei's GDP growth has been trailing behind not only other ASEAN states, but Asia overall. Economic growth in 2013 was -1.8%, compared to North Korea +1.1%. The quarter one (Q1) GDP performance this year was -3.3%, in contrast with Malaysia's robust +6.2% growth. Oil production is also on the decline. Brunei's total crude oil exports was B$476.8 million in May 2013, but it has dropped 17% to B$395.7 million in May 2014. This is despite that oil prices remain relatively constant in these periods. LNG (Natural gas) exports dropped 20% from the previous year.It is another major blunder by the government of Brunei. The country established its own monetary authority in 2011. Since then it has been playing on interest rate policies without consulting the banking industry. After an interest rate readjustment in 2013, Citibank announced that it would pull out from Brunei effective April 2014 after over 40 years of presence. Other foreign banks such as HSBC and Standard Chartered are limiting services to consumer and corporate customers.