The use and potential misuse of sovereign wealth funds in Asia has been newsworthy of late, especially because of their size and high profile investments. China and — and possibly Japan as well — look to parlay their government-owned investment vehicles. With its small population base, and vast reserves of oil and natural gas, the small Southeast Asian nation of Brunei Darussalam, located on the north-eastern side of the island of Borneo, has been able to lever its economy into providing an enviable standard of living for its population and mega-billions for its ruling Royal family.
But just as Brunei reaps the rewards of windfall profits generated by historically high oil prices, so it joins the ranks of holders of sovereign wealth, currently under increasing scrutiny owing to their opaque corporate governance structure and general secrecy. While, unlike such foreign exchange surplus countries as Singapore, Brunei has distinguished itself through its portfolio investments, not all of them sound. Brunei also shares the external vulnerabilities of oil producer states. This article seeks to structurally examine these vulnerabilities with specific reference to the dynastic crisis of 2001-2002 and sequels. It also seeks to explain how the Brunei Sultanate recovered from this crisis, handsomely adding to the Royal fortunes, without, however, precluding future crisis and even collapse whether from domestic (dynastic) or external shocks.?
Identified by analysts as conforming to, variously, an economic rentier state model,  or suffering from "Dutch disease effects,"  the former British protectorate of Brunei Darussalam, with its small population base (374,000 in 2007), and vast — albeit finite — reserves of oil and natural gas, has been able to lever its economy to provide an enviable standard of living for its population and mega-billions for its ruling Royal family, led by Sultan Hassanal Bolkiah, along with a network of close non-Royal collaborators. Brunei Darussalam also shares the external vulnerabilities of oil producer states. This article seeks to structurally expose these vulnerabilities with specific reference to the dynastic crisis of 2001-2002, still playing out with respect to the recovery of billions of dollars of squandered assets on the part of a Royal sibling (Prince Jefri). It also seeks to explain how the Sultanate recovered from this crisis without, however, precluding future crisis and even collapse, whether from domestic (dynastic) or external shocks.
Understanding the Vulnerability of Resource Rich Economies
The notion that states based upon external sources of income are substantially different from states based upon domestic taxation was first proposed with reference to a number of oil-exporting Middle Eastern countries. Beblawi  has drawn a distinction between a rentier state, rentier economy, and rentier mentality. Rentier economies become problematical, in this theory, when a rentier mentality prevails insofar as the work-reward causation is broken and reward or wealth is not related to work and risk taking. Rentier economies are by definition extroverted, forming high tech enclaves disconnected from the domestic economy both in terms of inputs, employment and outputs.
So-called Dutch disease effects, derived from studies of the economic impact of hydrocarbon revenues in the Netherlands in the 1960s, are said to derive from a bloated public sector and the rise of non-productive social expenditure. The "Dutch disease" has been used by economists to explain the deindustrialization of an economy as a result of the discovery of a natural resource. Typically, in this analysis, the discovery raises the value of the country’s currency making manufactured goods less competitive and encouraging imports to rise. In any case, unlike Holland in the 1960s and the UK in the 1970s, Brunei obviously lacks a manufacturing base. Deindustrialization has never been the issue. Nor has its currency greatly risen.
Other economists have discussed a "resource curse thesis" or the costs associated with a booming mineral sector based on the observation that so many countries that have struck it rich with natural resources have ended up a decade or so later in great trouble. In this view, natural resource rich countries are subject to a boom-bust cycle with associated political instability arising from income differentials and unequal access to wealth. The ability to escape the "resource curse" has also given way to a small literature, some espousing neo-liberal/public choice or behaviouralist perspectives, others seeking explanations in "social forces" in favour of capitalist development in conjunction with a favourable external environment such as in Suharto’s Indonesia. 
I will expand upon a version of the "rentier state" model, especially since, unlike the Dutch disease description or "curse" metaphor, the rentier state analysis seeks to answer the crucial (and, in Brunei Darussalam, virtually taboo question) of who gets what, why, and how?
However theorized, the problem becomes one of expanding the skill base of the population, stimulating the private sector, diversifying the economy, especially through creation of downstream activities, achieving transparency in national accounting, and reining in unbridled consumerism by the super rich.
To add a slightly philosophical note, we could say that, for Bruneians, to consume is to be modern. In other words, Bruneians express their modernity through extravagant consumption patterns. Such behaviour is hardly confined to the Bruneian nouveax riche but, in the context of a steeply hierarchical and status-driven society, it well describes their reality. As role models, the Brunei Royal family have promulgatged a veritable consumer goods fetishism both at home, through ostentatious displays of wealth, and globally extending to the collection of a vast array of "trophy" and other assets, such as would merit the description of a "trophy capitalist" economy.
Economic History: A Survey
Long a nation of self-sufficient agriculturalists and peasant fishermen living in a favourable ecological niche in the huge tropical island of Borneo, Brunei has experienced a major shift away from agriculture during the last three decades. A rubber plantation economy with pre-war origins only survived into the 1960s. The