WORLD'S NEWEST NATION; Brunei leaves Britain's nest

After much hesitation, Southeast Asia's smallest nation, Brunei, became independent on New Year's Day. Britain then handed over control of defense and foreign affairs to the sultan , Sir Hassanal Bolkiah, and Brunei joined the United Nations and the Association of Southeast Asian Nations.

Until quite recently few people probably knew where Brunei was. But the year leading up to independence saw a flood of foreign dignitaries making their way to the country's capital, Bandar Seri Begawan.

During 1983, the premiers of Japan, Canada, and Malaysia, the foreign ministers of Singapore and Thailand, and the King of Malaysia all dropped by. The King, actually, was there for the polo, but the others had business on their minds: Brunei is not only the smallest Southeast Asian nation - it is also the richest.

Brunei's wealth is of Middle East proportions. In an age of recession, it must be the only country left where its ruler can blow half a billion dollars on a new palace and hardly make a dent in the state revenues.

In fact, Brunei's size, wealth, government, and society - not to mention problems - all make it seem like a Gulf state transposed to Southeast Asia. It is tiny: slightly larger than the state of Delaware, with a population at the last census (1981) of 192,832. Most inhabitants are Malay, although a sizable minority - around 20 percent - are Chinese. There is a smaller community of Ibans, an ethnic group related to the Malays.

Over 24,000 of the population, however, or 36 percent of the work force, are temporary immigrants. Like many affluent countries, Brunei has difficulty persuading its citizens to do manual or menial work. Government is a family affair

The form of government might be called late-20th-century feudal. The sultan is virtually an absolute ruler. His principal advisers are his three brothers and his father, Sir Omar Ali Saifuddin, who abdicated in 1967.

The family held elections once, over 20 years ago, found them not to their liking, and have not repeated them since.

Brunei's rulers are Western-educated and reputedly pro-British. Sir Omar, for example, has built a Sir Winston Churchill Memorial Museum in the center of the capital. Reportedly the only such museum in the world, it comes complete with recordings of Sir Winston's most historic speeches.

But the royal family, like the majority of Bruneians, is Muslim and the sultan is apparently moving the country toward being an Islamic state. Most bars have already closed, Islamic dietary rules are strictly enforced, and mixed bathing has reportedly been banned everywhere except at the swimming pool of the Sheraton Hotel.

Like its Middle Eastern counterparts, Brunei's wealth is based on oil. The wells here produce about 160,000 barrels of crude oil a day. The Brunei government and Royal Dutch Shell share the profits, while the British government provides a battalion of Gurkhas to defend the oil fields.

The country is estimated to have about 20 years' reserves of oil, and businessmen are casually confident that more will be found.

''I'll bet that 20 years from now this country will still have 20 years' reserves,'' said a foreign banker. He had better be right. Oil, together with newly found natural gas, provides 75 percent of the government's revenues.

And thanks to oil, Brunei's average per capita annual income of around $19, 500 is higher than that of either the United Arab Emirates, Libya, or Saudi Arabia. Its foreign reserves - about $12 to $13 billion - are greater than many Middle Eastern oil producing states, too.

''This country is unique,'' said a banker in a tone approaching awe. ''Mathematically speaking, it could live off its interest.''

At first sight, the place does not seem particularly affluent. The road downtown from the airport is reminiscent of an undistinguished London suburb transplanted to the tropics - line upon line of uniform, neat houses bordering a well-maintained highway. And the center of the capital still looks like a provincial Malay town. Chinese shophouses dominate the place, though a few air-conditioned shopping centers are beginning to elbow their way in.

The most obvious signs of change are the imposing mosque in the center of the capital, the Churchill museum, and a scattering of large new ornate government buildings. 'Money is no object'

Foreign businessmen are looking forward excitedly to another building boom in the next few years, as the government moves to acquire the final trappings of a sovereign state.

''It's going to be great,'' said one businessman. ''Money is no object to this government. They'll go for the biggest and the best.''

The affluence of the ordinary citizen is, of course, on a more modest level.

''The average Bruneian,'' says a banker, ''has a house, a car, a TV, and has probably made a couple of trips to places like Hong Kong or Manila.''

He is probably exaggerating slightly. Longtime Brunei watchers say, for example, that there is still some malnutrition in the villages, although nowhere near as prevalent as in other countries of the region.

But the living is good. Education and health care are free. There is no income tax. The starting salary for a junior executive in the government service is around 1,800 Brunei dollars a month ($840). A driver would make 500 to 600 Brunei dollars a month ($230-280). And government employees - around 40 percent of the work force - can get low interest government loans for houses and cars. After a certain period of service, government employees can make the hajj, the pilgrimage to Mecca, at government expense.

Signs of material progress are everywhere. According to official figures there is one television set for every six people. And there are more cars than you can imagine.

Brunei has over 50,000 private motor cars registered, excluding trucks, buses , motorbikes, or government vehicles. That works out to about one car for every two adults. More than 15 new cars were registered every day in 1982 - as opposed to 14 buses the whole year. All this for 400 miles of paved roads.

Gasoline is so cheap that a question about its price stumped one resident. ''I've never thought about it,'' he said. ''I suppose a tankful costs about 10 Brunei dollars ($4.65).''

Affluence has also made the country more dependent than ever on the outside world.

Brunei used to be a seagoing state. It now imports more than half of its annual fish needs and most of its rice comes from abroad. To provide fresh meat for its citizens, the government has bought a cattle farm in northern Australia. At 2,262 square miles, the farm is 36 square miles bigger than Brunei itself.

Agriculture accounted for 1 percent of the country's gross domestic product, in 1981 - and that was an increase over the preceeding year.

''The attitude here,'' says a banker, ''seems to be: 'Why grow it, when you can buy it in a supermarket?' ''

Now that independence has arrived, the sultan's three brothers will probably assume more official government titles. The older brother, Prince Mohamed, is expected to become prime minister and foreign minister. Prince Sufri will probably be made finance minister, and Prince Jefri interior minister.

This does not seem to mean that the family will introduce a more representative form of government. Some senior officials are reported to have said they do not exclude elections eventually, but do not expect them yet.

Supporters of the government, slightly embarrassed at old-fashioned feudalism enduring so far into the century, say that democracy is one of the few luxuries Brunei cannot afford. It could lead to turmoil, and perhaps even radicalism, which could then cause one of its bigger neighbors to intervene. One neighbor, Indonesia, has after all already annexed one small state, East Timor, on the grounds that it was a security risk.Other supporters of the status quo say that the 22-member legislative council provides the sultan with an informal ear to the ground. They also note that the government is increasingly becoming the preserve of technocrats. This may be true. But the sultan can choose to ignore the council - which apparently meets only once a year. And he can hire and fire the technocrats at will. The final decision on state matters, major and minor, resides with the sultan.

He is something of a puzzle. His detractors describe him as a painfully shy person of mediocre intellect, with little interest in affairs of state. Most observers agree that his overriding passions are polo and automobiles. A well-informed Brunei watcher says he has about 70 cars, a representative selection of the world's luxury automobiles.

Some foreigners who meet him often dispute this image. ''It's just not true that he's painfully shy,'' said an American whose organization does a lot of business with the government. ''The first time I met him he spent 10 minutes putting me at ease. And when we talked business, he'd done his homework.''

The only time this writer saw him, at his birthday celebrations last July, he sat through cermonies and read a speech before the nation's assembled dignitaries with the ease and authority of someone who seemed to enjoy wielding power. A second wife for the sultan

Although Western educated - at Sandhurst, Britain's equivalent of West Point - the sultan's modernism stops short of monogomy. His second marriage a few years ago to an ex-airline stewardess is said to have caused unhappiness inside and outside the royal family.

It has also caused problems for government protocol officials. The official program of the birthday ceremonies on July 15 noted rather uncomfortably that the sultan would arrive accompanied by either his first or his second wife. As it happened, seniority won the day.

Another subject of considerable discussion is the sultan's new palace, being built by the giant Ayala Corporation of the Philippines. Enrique Zobel, whose family owns Ayala, is an avid polo player and good friend of the sultan.

Ayala has brought in Bechtel Corp. to do much of the construction of the palace, which spreads over 350 acres, including 300 acres of gardens. When completed, the palace will purportedly have 1,800 rooms, along with air-conditioned parking for 300 cars, and stables - also air-conditioned - for a large number of polo ponies. The palace is estimated to cost around 1 billion Brunei dollars (almost $500 million).

That is over twice the annual defense budget, and almost six times the annual education budget.

''But by his standards, it's peanuts,'' said a banker. ''He didn't even have to get a loan to build the thing.''

When finished, the palace will serve as residence, center for many government functions, and, some observers suggest, a secure fortress if disorder breaks out.

The sultan and his family are said to be highly conscious of security. Their preoccupation with this goes back to 1962, when the leftist Brunei People's Party won an overwhelming majority in the legislative council elections. The sultan refused to convene the council, and the party rose in revolt. A royal suspicion of elections

The royal family fled for their lives. The revolt was finally crushed by British troops flown in from Singapore. At least 40 people were killed. The incident left the family with a suspicion of elections and an abiding attachment to the British Gurkha guards. This attachment was increased by the presence of two neighbors, Malaysia and Indonesia, who did not seem convinced that Brunei deserved to exist as a separate political entity.

Several People's Party leaders escaped, allegedly with the help of Malaysian warders, from a Brunei jail in 1973. Other Malaysian-based Bruneian dissidents later went to Libya for guerrilla training, although they do not seem to have put their training to use.

About 20 people are still in prison for political offenses, including some leaders of the People's Party. Three such political prisoners were released on the occasion of the country's independence, Jan. 1 this year.

As independence approached, Brunei's interest in Britain's Gurkhas grew stronger. The sultan already has his own Gurkha unit, recruited from retired British officers and Gurkha troops. The highly paid force currently numbers around 900 men, but is expected to increase after independence to 2,000. Its main task is believed to be ensuring the personal security of the royal family.

Brunei is also in the process of building up its own army, the Royal Malay Brunei Regiment. Well-equipped, well-paid, and trained by British officers, the regiment is under strength. Bruneians are apparently not much attracted to the rigors of military life.

Neither unit is, however, considered as reliable as the British Gurkha battalion permanently based in Brunei.

When negotiations on independence resumed in 1979, and the sultan's father ascertained that the date could not be postponed for another 20 years, the royal family made it clear they wanted the Gurkhas to stay.

But there was a snag: The sultan wanted the Gurkhas to be put under his direct command, rather than under the British commander in Hong Kong.

The British refused. Although they tend to be tight-lipped on the subject, British Brunei watchers are clearly worried that the country will be faced with internal discord in years to come. They do not want the British Army to be used for internal political suppression.

By the beginning of 1983, negotiations had reached crisis point. First, a group of senior but anonymous British civil servants arrived to discuss the Gurkhas' future. Furious at this perceived snub, the sultan's father, Sir Omar sent them packing. Sir Omar was also becoming rather irritated with the British High Commissioner Arthur Watson, with whom he was having extensive meetings over the Gurkha issue.

Mr. Watson left abruptly one night in April. Unnerved staff at the High Commission claimed lamely that Watson had come to the end of his official tour of duty. He had, in fact, been kicked out.

A few days later the sultan told a visiting junior defense minister from London that, if he did not receive direct control over the Gurkhas, Brunei would abrogate Shell's oil agreements. Britain aimed to please

The British moved fast to mollify the sultan. They found a high commissioner tailor-made for Brunei.

Besides being a polo fanatic and a Sandhurst graduate, the sultan is a great admirer of Prince Charles. The new high commissioner, Frances Cornish, is an avid polo player, and a Sandhurst graduate. His last posting was as an aide to Prince Charles.

The new man seems to have saved the day. Suddenly in September, agreement was announced over the Gurkhas: they would stay but Britain, not Brunei, would have ultimate control over them. The reasons for this sudden change of heart by the sultan have not been explained, but a very reliable source says that Prince Charles played a major role in the solution. High Commissioner Cornish, the source says, simply persuaded the prince to attend the formal independence ceremonies scheduled for Feb. 23. Delighted at this, the sultan acceded to Britain's demand over the Gurkhas.

Nevertheless, relations with Britain are changing fast. The British crown agents no longer administer most of Brunei's foreign investments. These have been taken over by a group of US banks, including Citibank and Morgan Guaranty. Its former enemies, Indonesia and Malaysia, seem to have been largely successful in rebuilding bridges with Brunei.

But so far it is predominantly Chinese Singapore rather than Muslim Malaysia that has established the best relations with Brunei. Singapore is training government officials - including diplomats and finance specialists - and Army officers. A battalion of the Singapore Army is usually in Brunei to boost the sultan's security.

What happens when the oil runs out? Government officials have talked of diversifying the country's economic base for years, but have not come up with any plans. The country desperately needs a whole managerial class to run the country. But will the Western-trained technocrats be willing simply to follow orders? Or will they demand a share of the decisionmaking? Will they tolerate a free-spending Islamicizing sultan, even if his extravagance is within the budget?

Questions like these tend to leave most observers uncertain about what is in store for Brunei. The present is secure, and the future could well be, too. But the future is disconcertingly vague.