Getting to know Brunei Darussalam, the oil-rich state
that chairs Asean for the fourth time this year
For one of the smallest nations on earth, Brunei Darussalam – which means ‘Brunei, the house of peace’ – packs a serious financial punch. Home to some of the largest oil fields in Southeast Asia, the pint-sized nation’s wealth and relative stability resulted in it being the first nation admitted to Asean outside of its founding members.
As it chairs Asean for the fourth time, Brunei will be navigating choppy waters, with tensions over territorial disputes in the South China Sea remaining acute. Divisions within the ten-member bloc also linger in other areas. The formation of the Asean Economic Community, slated for the end of 2015, is a major obstacle in Asean’s immediate future. Brunei is tasked with ensuring that the bloc is on course to implement the final, and most crucial, stages of integration in a timely fashion.
Brunei, the fourth-largest oil producer in Southeast Asia and the ninth-largest exporter of liquefied natural gas (LNG) in the world, has chosen “Our people, our future together” as the slogan for its chairmanship. It will organise some 400 meetings, including two Asean leaders’ summits and the East Asia Summit, which brings together important partners such as the US and China.
Economic integration will offer exceptional trade opportunities for a region of some 600 million people, reducing trade barriers and facilitating easier movement of capital and labour. This promotion of economic growth will benefit Brunei, which already has an attractive foreign investment law. The nation has no capital gains or personal income tax and investors enjoy a wide range of incentives, including up to 20 years’ exemption from corporate For one of the smallest nations on earth, Brunei Darussalam – which means ‘Brunei, the house of peace’ – packs a serious financial punch. Home to some of the largest oil fields in Southeast Asia, the pint-sized nation’s wealth and relative stability resulted in it being the first nation admitted to Asean outside of its founding members.
As it chairs Asean for the fourth time, Brunei will be navigating choppy waters, with tensions over territorial disputes in the South China Sea remaining acute. Divisions within the ten-member bloc also linger in other areas. The formation of the Asean Economic Community, slated for the end of 2015, is a major obstacle in Asean’s immediate future. Brunei is tasked with ensuring that the bloc is on course to implement the final, and most crucial, stages of integration in a timely fashion.
Brunei, the fourth-largest oil producer in Southeast Asia and the ninth-largest exporter of liquefied natural gas (LNG) in the world, has chosen “Our people, our future together” as the slogan for its chairmanship. It will organise some 400 meetings, including two Asean leaders’ summits and the East Asia Summit, which brings together important partners such as the US and China.
Economic integration will offer exceptional trade opportunities for a region of some 600 million people, reducing trade barriers and facilitating easier movement of capital and labour. This promotion of economic growth will benefit Brunei, which already has an attractive foreign investment law. The nation has no capital gains or personal income tax and investors enjoy a wide range of incentives, including up to 20 years’ exemption from corporate taxes, and exemption from import duties on raw material, component parts and machinery, among other things.
For the past 80 years, Brunei’s oil and gas reserves have buoyed the country’s economy. Revenues from the petroleum sector account for over 90% of Brunei’s export income – valued at $12.1 billion in 2011 – and more than half of its gross domestic product (GDP).
Thanks to these huge reserves, Brunei’s four million people enjoys a high standard of living. With a GDP per capita of $48,000, Forbes ranked the tiny sultanate as the fifth richest nation out of 182 countries last year.
The government provides free medical services – which the World Health Organisation ranks among the best in the world – and free education up to and including university level, resulting in one of the world’s highest literacy rates. The state’s generosity doesn’t end there. Dependent on imports from Singapore, the EU, Japan and China, the government subsidises housing, electricity and some food staples such as rice, sugar and milk.
However, as about 80% of the country’s food requirements are imported, Brunei remains exposed to world food price fluctuations.While Bruneians largely enjoy the good life, there is rising awareness that the country’s reliance on the oil and gas industry will leave it vulnerable once its reserves are depleted – an eventuality expected within the coming 40 years. The government’s attempts to diversify Brunei’s economy into agriculture, forestry, fishing and aqua-culture have achieved limited results, and the country continues to spend heavily on the oil and gas industry.
A predominantly Muslim nation, the state is developing its Islamic banking sector and positioning itself as a halal standards centre. The blue and white national halal branding scheme, Brunei Halal, is one of the first attempts to offer a halal standard in a multi-trillion dollar global industry.
With Brunei looking to a future far removed from its traditional economic foundations, it could prove a perfect fit as chair of Asean at this point. The bloc has also reached a crucial crossroads on its ambitious new path. The year 2013 could provide an ideal opportunity for Brunei and Asean to move forward together.
