By - Louis Kraar

(FORTUNE Magazine) – Living in a $300-million palace bigger than the Vatican is nothing special for Sultan Muda Hassanal Bolkiah Mu'izzadin Waddaulah, 41. Says he: ''When you are rich, you do not buy a minicar, you buy a Rolls-Royce.'' No one in the world is richer than the Sultan, absolute ruler of Brunei Darussalam, a tiny country that shares the island of Borneo with Malaysia and Indonesia. What makes him the richest man in the world -- with a net worth of at least $25 billion, not including oil in the ground -- is that practically everything in the 2,226- square-mile mini-state (about the size of Delaware) belongs to him. It also helps that Brunei has a population of only 224,000 to go with its vast petroleum reserves. ''Allah,'' he notes, ''has been kind in providing us with resources.'' An estimated $20 billion of the Sultan's money is socked away in foreign investments managed by American, Japanese, and Swiss advisers. He also owns half or more of a series of joint ventures, with Shell and Mitsubishi, that produce, market, and transport the country's oil and gas. The earnings from these various enterprises are not disclosed, but Brunei should have a trade surplus of nearly $1.7 billion this year. A U.S. banker figures that the Sultan can cover the country's expenses, invest some $1 billion annually, and ''still afford to splurge $100 million a year for himself.'' Splurge he does. He has two wives and nine children -- three sons and six daughters -- who pose for family photos dripping diamonds and gold. The Sultan owns more than 200 polo ponies, which he transports on Royal Brunei Airlines, the state carrier that flies to Australia, India, and Japan, among other Asian countries. His collection of cars includes a yellow Rolls and an Aston Martin Lagonda bearing a gold plaque on the engine inscribed: ''Built especially for His Royal Highness, the Sultan of Brunei.'' This year he bought a red diamond weighing slightly less than a carat for $880,000 at an auction in New York. He also picked up some other trinkets abroad, including the Dorchester Hotel in London and a shopping center and hotel in Singapore. When construction engineers asked the Sultan how big he wanted Brunei's new airport to be, he replied, ''How big do they come?'' Now Asia's smallest country has the longest runway in the region -- 2.5 miles. To go with the airport, he bought a pair of Boeing 727 jets -- along with a yacht -- from Saudi dealmaker Adnan Khashoggi. Hassanal is the 29th Sultan in a royal line stretching back to the 15th century. No mere figurehead, he serves as prime minister, defense minister, and head of the Islamic state religion. He also holds the rank of general and likes to strut around in a ribbon-bedecked uniform topped by a green beret. While living high himself, the Sultan spreads the wealth around in what must be Asia's most complete welfare state. His subjects, mostly Malays, enjoy a laid-back existence with free education through college, free medical care, auto and home loans at minimal interest, and generous pensions. There is no income tax. With subjects who customarily kiss his hand, the Sultan can hardly be a modest fellow. While he is very much a family man in Brunei -- with both families -- he has a reputation as a playboy away from home. A Western businessman recalls having to recruit attractive women to attend parties for the Sultan in Singapore. The Sultan's late father, Sir Omar, was an Anglophile who built an elaborate museum devoted entirely to Winston Churchill. He dispatched his son to Britain for a bit of polish at the Sandhurst Royal Military Academy. But Hassanal never made it to graduation. In 1967, when he turned 21, his father summoned him home to assume the throne.

Sir Omar apparently wanted his son to have a long spell of on-the-job training, though the old man retained power for years. Subjects greeted the neophyte Sultan in the appropriately humble manner, addressing not the august eminence himself but ''the dust under the feet of the most exalted king and shining ruler.'' Everyone knew, however, who made the decisions. Visitors would chat briefly with Hassanal, then get down to business with his father. Tension between the two apparently began in 1981 when Hassanal took a second wife, Mariam, 32, a former hostess with Royal Brunei Airlines. He had married Anak Saleha, a cousin described by a royal biographer as ''a sweet, bedimpled, soulful-eyed lass,'' when he was 19 and she 16. Sir Omar preferred wife No. 1. When the Sultan took Mariam along on a trip to Britain, his father called them home immediately, feigning illness. Father and son finally reconciled last year just before Sir Omar's death at 72. The Sultan has been forced to deal with the outside world only since 1984, when Brunei became fully independent of Britain. Up to then he had continued his father's policy of running affairs at home while relying on London for defense and foreign relations. Brunei has been operating under an official state of emergency since 1962, when British troops quelled a rebellion backed by Indonesia. The Sultan maintains a formidable military force of 35,000 men equipped with U.S. and West German helicopters, British Scorpion tanks, and French Exocet missiles. He also ''rents'' a British Gurkha battalion, paying the unit's expenses, and his palace guard is recruited from among retired Gurkhas. The Sultan's palace, which is both home and office, contains 1,788 rooms. Its four connected buildings, topped with a pair of 22-karat gold-plated domes, are spread over nearly 300 acres. The Sultan turned to a polo-playing pal, Philippine architect Enrique Zobel, to translate his dream palace into reality. It took the French 72 years to create Versailles, but the Sultan was in a hurry. Zobel had to throw up the Brunei palace in just 3 1/2 years. For a housewarming when the palace was finished three years ago, 4,300 invitations went out. Britain's Prince Charles turned up, to the delight of the Sultan, who keeps two extra thrones in the palace for visiting monarchs. Charles sat next to wife No. 2 at the banquet. Wife No. 1 skipped the event. Giving money to causes abroad is the Sultan's way of being taken more seriously. When Brunei joined the United Nations in 1984, the Sultan donated $500,000 to New York City to feed the elderly poor. Mayor Edward Koch gave him a key to the city. In response to private pleas from the Reagan Administration, the Sultan quietly contributed $10 million to the contras in Nicaragua. The money never got there because former White House aide Oliver North mistakenly deposited it in a Swiss businessman's bank account. The Sultan apparently got his $10 million back, but he was acutely embarrassed when the whole story came out in the congressional investigation into the contra affair. How long can anyone, even the Sultan, continue throwing around so much money? Petroleum experts in Brunei figure that oil and gas revenues will flow well into the next century. By that time, the Sultan and his subjects expect to finance their lavish style with investment earnings. Less certain is the durability of an absolute monarchy in a country that's becoming more educated. Says a British businessman intimately familiar with Brunei: ''Sooner or later, someone -- perhaps in the army -- is going to ask why the state is still a family fiefdom.'' The Sultan cannot imagine such an occurrence. As he puts it: ''I think the people are more or less happy with their lives. They don't want any more. They have a good life. Why should they want more?'' Good question.