November 19, 2010
Sultanate of Brunei Darussalam
The ferry ride from Labuan to Brunei is a quick hour and fifteen minutes… and I have to be brutally honest with you about something: I’m not exactly what you would call ‘sea-worthy’.
I’ve traveled by ferry just a handful of times in the last few years, once from Helsinki to Tallinn, Estonia and another time from Spain into Tangiers, Morocco. Both times were white-knuckle rides for me. Fortunately, the South China Sea was very friendly today.
The first class ferry ticket (purchased in Malaysia) set me back an incomprehensible $12.50, for which I got a front-row seat to Borneo’s gorgeous coastline.
Borneo is huge… country-sized huge. It’s the third-largest island in the world that’s not a continent (Greenland and New Guinea being the top two). To give you an idea, Borneo is twice the size of Germany and much larger than Texas.
The island is also split among three nations– Malaysia, Indonesia, and Brunei; Brunei is the smallest, yet by far the richest (on a per-capita basis). In a pure geological accident, Brunei’s waters are filled with oil and gas reserves, and the country has prospered as a result… sort of.
Brunei is technically a constitutional sultanate (like a quasi-religious monarchy), yet everyone here knows that the Sultan’s has absolute authority. There are no elections in Brunei, and the people have no power whatsoever.
It’s illegal to suggest anything that could possibly be interpreted as disparaging about the Sultan, and this puts the Bruneian personal freedom index up there with such stellar examples as North Korea and Cuba.
Furthermore, the Sultan owns all the wealth in Brunei… personally. He personally controls the oil and personally owns every square inch of land in the country. Any development activity has to receive his personal concession.
Needless to say, he puts his own face all over the national currency, just to constantly remind his people of his own magnificence. It’s intellectually offensive, to say the least. How can one man exercise god-like authority over a nation, simply by accident of birth?
The system is perverse… and if I were Bruneian, I would be planting as many flags as possible; I couldn’t imagine having my personal and financial interests domiciled solely in a country where any hint of wrongdoing could land me in jail and have my assets frozen.
I raise this issue to underscore an important point: regardless of where you are from– Canada, USA, Switzerland, or even ‘rich’ Brunei, we all face some sovereign risk from keeping all of our assets and interests within one jurisdiction.
As any old boxer will tell you, the punch that knocks you out is the one you don’t see coming. Sovereign risk is that shadow punch: when you bank, invest, own property, store gold, do business, etc. in the same country, it’s like you’re fighting a heavyweight champion with a blindfold on.
Governments can unleash a vicious flurry at any time: capital controls, tax code changes, regulatory changes, new 3-letter monitoring agencies, etc. Each of these is a threat, they can come without warning. We might wake up tomorrow to capital controls… a punch that most people will never see coming.
Is it possible that the knockout blow will never come? Of course… but are you willing to take that risk? I’m not, and I’m guessing you’re not either.
That’s why we launched our premium service Sovereign Confidential, and are holding the sold-out offshore workshop in Panama– to provide actionable information and contacts for diversifying assets and interests across multiple jurisdictions. I call this planting multiple flags.
In my mind, the most important place to start is with a bank account. Establish a foreign bank account in a jurisdiction that you’re comfortable with (there are dozens across the globe, ranging from Belize to Labuan to St. Vincent).
This is an important step because, when you move your capital outside of your home country, fat cat bureaucrats no longer have authority to freeze your accounts with just a few clicks.
I also strongly recommend foreign property, especially if it has the potential to be agriculturally productive. In many countries (Latin America, parts of Asia) this can be dirt cheap (no pun intended)… and it may provide a worthy investment return as well as a possible escape hatch if you need it.
Lastly, I recommend considering a second citizenship. Think about this as the ultimate insurance policy… you may never need it, but another passport might just be your ticket out of dodge, and ticket in to a new safe haven.