While growth in Brunei Darussalam’s economy has slowed in recent years, a rising contribution from the non-oil and gas sectors, particularly agriculture, indicates that efforts to accelerate diversification are producing results.
Figures released by the Department of Economic Planning and Development (JPKE) in January showed that while the Sultanate’s GDP registered quarter-on-quarter (q-o-q) growth of just 0.1% for the third quarter of 2012, the non-hydrocarbons sector expanded 3.7% over the same period. The agriculture, forestry and fisheries sector registered the highest growth at 4.8%, followed by construction and manufacturing which grew 2.1% and 2%, respectively.
In contrast, oil and gas, which traditionally account for the lion’s share of export revenues, fell 4.1%. The decline continues a trend set in the first quarter of 2012, when hydrocarbons revenues rose by just 8.5% compared to 72% in the last three months of the previous year.
As part of its “Wawasan 2035” vision, Brunei Darussalam aims to gradually reduce its dependence on resource-related wealth by transforming itself into a knowledge-based economy by 2035, while also carving a niche as a trade and financial services centre. Resources currently make up around 90% of exports and 85% of government revenue. The long-term economic vision also includes a drive to promote alternative industries, such as technology and innovation, halal food and manufacturing, alongside increased support for innovative, non-standard foreign investment and research into renewable energy technologies.
The Deputy Director General 2 at JPKE, Abdul Amin Hj Hashim, told the French-Bruneian Business Association in January that the private sector would need to achieve “double-digit” growth if the country is to reach the government’s target of 5-6% annual GDP expansion. Estimates currently put private sector growth at between 3% and 4% per year. “[The private sector] has been growing at a positive rate, but it is not enough to push our overall growth rate higher, especially when oil sector growth is down,” Hashim said.
However, entrepreneurs are warning they will be unable to meet the high-growth goals set by the government unless broader support and reforms facilitating foreign direct investment (FDI), including a “fast track” for business processes such as licensing and work permits, are introduced. They said attracting more FDI would play a crucial role in supporting their expansion both at home and globally.
Their comments echo those of the Asian Development Bank, which said in 2011 that diversification would be best achieved by fostering a more conducive business environment for the private sector, improving the institutional capacity of the government and developing the finance industry.
Ambrose Nathan, chief finance officer of the International School of Brunei, suggested smaller businesses should focus more on the external market. “There are many SMEs here with the potential for exports, or even to combine to form a big organisation,” Nathan said. “[I]nternal growth … is very limited, whereas if you look externally there are many opportunities.”
The government had the opportunity to draw on these and other recommendations last month when a high-profile US business delegation, which included representatives from global bank Citi, US oil companies Conoco Phillips and ExxonMobil, business magazine Forbes Asia, energy company General Electric and technology firm Google visited the Sultanate.
Talks focused on Brunei’s plans for economic diversification, the country’s role as a driver of regional agreements, such as the Trans-Pacific Partnership, and its priorities for the 2013 ASEAN chairmanship.
Brunei Darussalam’s efforts to diversify into a trade and financial centre also received a boost when officials from the EU revealed at a recent conference that the body was considering whether the Sultanate could play a role as a gateway for trade in South-east Asia.
Speaking in mid-March, the deputy head of the EU delegation to Brunei, Indonesia and ASEAN, Colin Crooks, said the bloc was aware of the Sultanate’s strategic importance. “We recognise that Brunei is one of the founding members of the Trans-Pacific Partnership and it’s at the heart of the ASEAN Economic Community and is also chair of ASEAN, so the key is to keep that door open over the coming years because EU and Brunei relations have potential,” he said.
Rob Fenn, British High Commissioner to Brunei, added that while the Sultanate undoubtedly offered advantages, such as an English-speaking workforce and high standard of living, smaller UK companies would be weighing up whether the country could provide a springboard into the region when making their decisions.
Experts agree that global trade will play a key role in Brunei Darussalam’s efforts to diversify its economy. Focusing on the international economy, they say, will help it avoid being saddled with a bottom-up reform process.