Brunei’s Investment Outlook for 2019

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ASEAN Briefing-The Guide to Employment Permits for Foreign Workers in Brunei (002)

Brunei is an oil-rich independent country which relies on exports of crude oil and natural gas. Its revenues from the petroleum sector accounts for over a half of the country’s GDP. It is the third largest oil producer in Southeast Asia, and has one of the highest GDP in the world. It also has substantial overseas investments which are derived from domestic hydrocarbon production.

Brunei’s government has in recent times sought to diversify the country’s economy by reducing its reliance on its hydrocarbon exports and focusing on industries such as information and communication technology and halal manufacturing.

Economy

Brunei is undoubtedly one of the richest nations in Asia due to its abundant production of oil and gas.

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The hydrocarbon sector remains the main source of its economic growth. However, in order to sustain further growth in the long term, Brunei’s government will have to develop the high value-added manufacturing and services sectors.

Data from Brunei’s Economic Planning and Development Department indicate the highest FDI inflows in the manufacturing industry in 2017 which was valued at BND680.2 million (US$500.6 million). Malaysia was the immediate source of investments, which amounts to BND674.7 million (US$496.6 million).

Brunei’s halal industry presents the potential for it to become a cornerstone of the country’s diversification efforts. Tapping into the growing global halal market, the high standards of Brunei’s halal industry is an attraction for foreign investors. The Global Islamic Economy Indicator (GIEI) for 2017/2018 ranked Brunei ninth among other Islamic countries. Individual economic indicators include food and beverages, cosmetics and pharmaceuticals as the Sultanate emphasizes on the advancement of these sectors to position itself as a halal industry hub in ASEAN.

Government Initiatives

Brunei’s Bio-Innovation Corridor (BIC) initiative forms an integral part of the country’s expanded economic diversification strategy. Formerly known as the Brunei Agro-Technology Park, the BIC was launched in February 2014 to lead the growth of non-oil and gas businesses in the country. It is an industrial park located north-west of the capital Bandar Seri Begawan, covering a total completed area of 194 hectares.

Brunei aims to complete all construction phases to reach the targeted 500-hectare land coverage. According to Brunei’s Ministry of Industry and Primary Resourses (MIPR), this economic zone is expected to generate 28,000 employment opportunities with approximately 9000 coming from food processing.

The halal economy is seen to kickstart the said BIC as it intends to court investors into importing commodities and investing in local processing capacities.

Apart from the BIC, the Brunei-Guangxi Economic Corridor (BGEC) – a bilateral project between Brunei and China is worth mentioning. Major project units include the China-Brunei Agricultural and Industrial Park, Guangxi Yulin Chinese Pharmaceuticals and the Guangxi Hechi Healthcare Industry.

BIC’s mission is to enable the growth of small and medium enterprises (SMEs) through a pro-business ecosystem with necessary infrastructure, reliable support and effective development programs.

Outlook for 2019

Brunei’s high reliance on oil and gas-related industries makes it vulnerable to external economic risks due to unexpected disruption in production because of ageing oil fields and any unfavorable change in global oil and gas prices.

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Hence, the country is speeding up investments in diversified areas such as the manufacturing and the services sectors.

The Asian Development Bank’s growth forecast for Brunei in 2019 is at 2 percent, citing an increase in the construction output by 24.4 percent and increased domestic investment into oil and gas extraction.

Furthermore, despite recent global inflationary tendencies, Brunei’s prices continue to be highly stable, with an annual average inflation rate of 0.2 percent. Inflation is projected to remain low in 2019 as well.

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ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Singapore, Hanoi, Ho Chi Minh City, and Jakarta. Readers may write asia@dezshira.com for more support on doing business in ASEAN.