Economy of Brunei

Brunei is a country with a small, wealthy economy that is a mixture of foreign and domestic entrepreneurship, government regulation and welfare measures, and village tradition. It is almost totally supported by exports of crude oil and natural gas, with revenues from the petroleum sector accounting for over half of GDP. Per capita GDP is high, and substantial income from overseas investment supplements income from domestic production. The government provides for all medical services and subsidizes food and housing. The government has shown progress in its basic policy of diversifying the economy away from oil and gas. Brunei's leaders are concerned that steadily increased integration in the world economy will undermine internal social cohesion although it has taken steps to become a more prominent player by serving as chairman for the 2000 APEC (Asian Pacific Economic Cooperation) forum. Growth in 1999 was estimated at 2.5% due to higher oil prices in the second half.

Brunei is the third-largest oil producer in Southeast Asia, averaging about 180,000 barrels per day (29,000 m3/d).[5] It also is the ninth-largest producer of liquefied natural gas in the world.[6]

Economy of Brunei
Sultan Omar Ali Saifuddin Mosque 02
Bandar Seri Begawan Centre Economy of Brunei Darussalam
CurrencyBrunei dollar BND
1 Brunei dollar = 1 Singapore dollar
1 April – 31 March (from April 2009)
Trade organisations
APEC, ASEAN, WTO. BIMP-EAGA
Statistics
GDP$20.38 billion (2010)
PPP Rank: 123rd
GDP growth
-2.3% (2014)[1]
GDP per capita
$51,600 (8th, 2010)
GDP by sector
agriculture (0.7%), industry (73.3%), services (26%) (2010)
1.2% (2010)
Population below poverty line
1000 person
Labour force
208,000 (2008)
Labour force by occupation
agriculture 4.5%, industry 63.1%, services 32.4% (2003)
Unemployment4.6% (2010)
Main industries
petroleum, petroleum refining, liquefied natural gas, construction
72nd (2017)[2]
External
Exports$12.67 billion (2008)
Main export partners
 Japan 46.5%
 South Korea 15.5%
 Australia 9.3%
 India 7.0%
 New Zealand 6.7% (2012 est.)[3]
Imports$12.07 billion c.i.f. (2007)
Main import partners
 Singapore 26.3%
 China 21.3%
 United Kingdom 21.3%
 Malaysia 11.8% (2012 est.)[4]
Public finances
$0
Revenues$10.49 billion (2010)
Expenses$10.43 billion (2010)
Not rated
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Macro-economic trend

This is a chart of trend of gross domestic product of Brunei Darussalam at market prices estimated[7] by the International Monetary Fund with figures in millions of Bruneian dollars.

year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1985 7,777 2.20 Bruneian Dollars 76
1990 6,509 1.81 Bruneian Dollars 82
1995 7,394 1.41 Bruneian Dollars 95
2000 7,441 1.72 Bruneian Dollars 100
2005 10,401 1.62 Bruneian Dollars 100

For purchasing power parity comparisons, the US dollar is exchanged at 1.52 Bruneian dollars only. Mean wages were $25.38 per man-hour in 2009.

The government regulates the immigration of foreign labor out of concern it might disrupt Brunei's society. Work permits for foreigners are issued only for short periods and must be continually renewed. Despite these restrictions, foreigners make up a significant portion of the work force. The government reported a total work force of 122,800 in 1999, with an unemployment rate of 5.5%.

Brunei Exports Treemap (2009)
Brunei Exports Treemap (2009)

Oil and natural gas account for almost all exports. Since only a few products other than petroleum are produced locally, a wide variety of items must be imported. Brunei statistics show Singapore as the largest point of origin of imports, accounting for 25% in 1997. However, this figure includes some transshipments, since most of Brunei's imports transit Singapore. Japan and Malaysia were the second-largest suppliers. As in many other countries, Japanese products dominate local markets for motor vehicles, construction equipment, electronic goods, and household appliances. The United States was the third-largest supplier of imports to Brunei in 1998.

Brunei's substantial foreign reserves are managed by the Brunei Investment Agency (BIA), an arm of the Ministry of Finance. BIA's guiding principle is to increase the real value of Brunei's foreign reserves while pursuing a diverse investment strategy, with holdings in the United States, Japan, western Europe, and the Association of South East Asian Nations (ASEAN) countries.

The Brunei Government actively encourages more foreign investment. New enterprises that meet certain criteria can receive pioneer status, exempting profits from income tax for up to 5 years, depending on the amount of capital invested. The normal corporate income tax rate is 30%. There is no personal income tax or capital gains tax.

One of the government's most important priorities is to encourage the development of Brunei Malays as leaders of industry and commerce. There are no specific restrictions of foreign equity ownership, but local participation, both shared capital and management, is encouraged. Such participation helps when tendering for contracts with the government or Brunei Shell Petroleum.

Companies in Brunei must either be incorporated locally or registered as a branch of a foreign company and must be registered with the Registrar of Companies. Public companies must have a minimum of seven shareholders. Private companies must have a minimum of two but not more than 50 shareholders. At least half of the directors in a company must be residents of Brunei.

The government owns a cattle farm in Australia that supplies most of the country's beef.[8][9] At 2,262 square miles (5,860 km2), this ranch is larger than Brunei itself. Eggs and chickens are largely produced locally, but most of Brunei's other food needs must be imported. Agriculture and fisheries are among the industrial sectors that the government has selected for highest priority in its efforts to diversify the economy.

The following table shows the main economic indicators in 1980–2017.[10]

Year 1985 1990 Jony 1995 Jony 2000 2005 Jony 2006 2007 Jony 2008 2009 2010 Jony 2011 2012 Jony 2013 2014 Jony 2015 2016 Jony 2017
GDP in $
(PPP)
12.10 Bln. 14.17 Bln. 18.67 Bln. 21.69 Bln. 26.99 Bln. 29.05 Bln. 29.85 Bln. 29.84 Bln. 29.52 Bln. 30.67 Bln. 32.48 Bln. 33.38 Bln. 33.20 Bln. 32.95 Bln. 33.17 Bln. 32.76 Bln. 33.54 Bln.
GDP per capita in $
(PPP)
54,530 55,924 64,990 66,767 72,933 75,847 76,560 79,577 77,667 79,302 82,567 83,659 82,053 80,221 79,638 77,422 78,196
GDP growth
(real)
... 1.1 % 4.5 % 2.9 % 0.4 % 4.4 % 0.1 % −2.0 % −1.8 % 2.7 % 3.7 % 0.9 % −2.1 % −2.5 % −0.4 % −2.5 % 0.5 %
Inflation
(in Percent)
1.1 % 2.1 % 6.0 % 1.2 % 1.1 % 0.2 % 1.0 % 2.1 % 1.0 % 0.2 % 0.1 % 0.1 % 0.4 % −0.2 % −0.4 % −0.7 % −0.1 %
Government debt
(Percentage of GDP)
0 % 0 % 0 % 0 % 0 % 1 % 1 % 1 % 1 % 1 % 2 % 2 % 2 % 3 % 3 % 3 % 3 %

Oil and gas industry

Brunei Shell Petroleum (BSP), a joint venture owned in equal shares by the Brunei Government and the Royal Dutch/Shell group of companies, is the chief oil and gas production company in Brunei. It also operates the country's only refinery. BSP and four sister companies constitute the largest employer in Brunei after the government. BSP's small refinery has a distillation capacity of 10,000 barrels per day (1,600 m3/d). This satisfies domestic demand for most petroleum products.

The French oil company Elf Aquitaine became active in petroleum exploration in Brunei in the 1980s. Its affiliate Elf Petroleum Asia BV has discovered commercially exploitable quantities of oil and gas in three of the four wells drilled since 1987, including a particularly promising discovery announced in early 1990. Recently, UNOCAL, partnered with New Zealand's Fletcher Challenge has been granted concessions for oil exploration. Brunei is preparing to tender concessions for deep water oil and gas exploration.

Brunei's oil production peaked in 1979 at over 240,000 barrels per day (38,000 m3/d). Since then it has been deliberately cut back to extend the life of oil reserves and improve recovery rates. Petroleum production is currently averaging some 200,000 barrels per day (32,000 m3/d). Japan has traditionally been the main customer for Brunei's oil exports, but its share dropped from 45% of the total in 1982 to 19% in 1998. In contrast, oil exports to South Korea increased from only 8% of the total in 1982 to 29% in 1998. Other major customers include Taiwan (6%), and the countries of ASEAN (27%). Brunei's oil exports to the United States accounted for 17% of the total exported.

Almost all of Brunei's natural gas is liquefied at Brunei Liquefied Natural Gas (LNG) plant, which opened in 1972 and is one of the largest LNG plants in the world. Over 82% of Brunei's LNG produced is sold to Japan under a long-term agreement renewed in 1993. The agreement calls for Brunei to provide over 5 million tons of LNG per year to three Japanese utilities. The Japanese company, Mitsubishi, is a joint venture partner with Shell and the Brunei Government in Brunei LNG, Brunei Coldgas, and Brunei Shell Tankers, which together produce the LNG and supply it to Japan. Since 1995, Brunei has supplied more than 700,000 tons of LNG to the Korea Gas Corporation as well. In 1999, Brunei's natural gas production reached 90 cargoes per day. A small amount of natural gas is used for domestic power generation. Brunei is the fourth-largest exporter of LNG in the Asia-Pacific region behind Indonesia, Malaysia, and Australia.

Brunei's proven oil and gas reserves are sufficient until at least 2015, and planned deep sea exploration is expected to find significant new reserves. The government sought in the past decade to diversify the economy with limited success.[11] Oil and gas and government spending still account for most of Brunei's economic activity. Brunei's non-petroleum industries include agriculture, forestry, fishing, and banking.

In 2015, Brunei registered its third year of economic recession, the only ASEAN nation to do so. Declining oil prices and a drop in production due to maintenance and repair work at major oil wells have dented the country's budget which will see a deficit in the fiscal years 2015-16 and 2016-17.[12]

Petrochemical industry

In the western part of the country, Liang is currently experiencing a major development with the establishment of SPARK[13] , which is a 271 hectare site developed to be a world class petrochemical hub. The first major investment at SPARK is the US$450 million Methanol plant developed by the Brunei Methanol Company, a joint venture between Petroleum Brunei and two leading Japanese companies, Mitsubishi Chemical Holdings and Itochu. The plant design will give an output of 2,500t of methanol per day (850,000t annually). The plant was officially launched by Sultan of Brunei Hassanal Bolkiah on the 25th of May 2010.[14]

Halal brand

Brunei Darussalam in July 2009 launched its national halal branding scheme Brunei Halal[15] which allows manufacturers in Brunei and in other countries to use the premium Brunei Halal trademark to help them penetrate lucrative markets in countries with significant numbers of Muslim consumers. The Brunei Halal brand is said to be the first proper attempt to put together a global halal brand that will reap the potential commercial returns of catering to the consumption needs of Muslims worldwide.

As envisioned by the Sultanate, the use of the Brunei Halal brand would signify to Muslim consumers the manufacturers' strict compliance with laws relating to Islamic teachings. Brunei also aims to build confidence in the brand through strategies that will both ensure the halal integrity of the products and unfaltering compliance with set rules governing the sourcing of raw materials, manufacturing process, logistics and distribution.

A new company, government-owned Brunei Wafirah Holdings Sdn Bhd, has been established as the owner of the Brunei Halal brand. Wafirah has entered into a joint venture with Brunei Global Islamic Investment and Hong Kong-based logistics firm Kerry FSDA Limited to form Ghanim International Food Corporation Sdn Bhd. Ghanim International manages the use of the Brunei Halal trademark. Producers that want to use the brand are required to first acquire the Brunei halal label (or the certification for compliance with accepted manufacturing and slaughtering practices under Islam) through the Department of Syariah Affairs' Halal Food Control Section. They can then approach Ghanim for their application to use the brand.

Macroeconomic trend

This is a chart of trend of gross domestic product of Brunei Darussalam at market prices estimated by the International Monetary Fund with figures in millions of Bruneian Dollars.

In the 1970s, Brunei invested sharply increasing revenues from petroleum exports and maintained government spending at a low and constant rate. Consequently, the government was able to build its foreign reserves and invest them around the world to help provide for future generations. Part of the reserve earnings were reportedly also used to help finance the government's annual budget deficit. Since 1986, however, petroleum revenues have decreased, and government spending has increased. The government has been running a budget deficit since 1988. The disappearance of a revenue surplus has made Brunei's economy more vulnerable to petroleum price fluctuations.

Brunei's gross domestic product (GDP) soared with the petroleum price increases of the 1970s to a peak of $5.7 billion in 1980. It declined slightly in each of the next 5 years, then fell by almost 30% in 1986.

This drop was caused by a combination of sharply lower petroleum prices in world markets and voluntary production cuts in Brunei. The GDP recovered somewhat since 1986, growing by 12% in 1987, 1% in 1988, and 9% in 1989. In recent years, GDP growth was 3.5% in 1996, 4.0% in 1997, 1.0% in 1998, and an estimated 2.5% in 1999. However, the 1999 GDP was still only about $4.5 billion, well below the 1980 peak.

The Asian financial crisis in 1997 and 1998, coupled with fluctuations in the price of oil have created uncertainty and instability in Brunei's economy. In addition, the 1998 collapse of Amedeo Development Corporation, Brunei's largest construction firm whose projects helped fuel the domestic economy, caused the country to slip into a mild recession.

References

  1. ^ http://www.bt.com.bn/news-national/2015/03/31/brunei’s-economy-slips-2-3 Archived 2016-06-22 at the Wayback Machine
  2. ^ "Ease of Doing Business in Brunei Darussalam". Doingbusiness.org. Retrieved 2017-01-24.
  3. ^ "Export Partners of Brunei". CIA World Factbook. 2012. Retrieved 2013-07-23.
  4. ^ "Import Partners of Brunei". CIA World Factbook. 2012. Retrieved 2013-07-23.
  5. ^ International Monetary Fund (2014). "BRUNEI DARUSSALAM" (PDF).
  6. ^ "Country Facts | Brunei Darussalam". www.un.int. Retrieved 2017-04-17.
  7. ^ "International Monetary Fund". Archived from the original on 2010-06-11.
  8. ^ "U.S. Relations With Brunei". U.S. Department of State. August 19, 2016.
  9. ^ Kieran Cooke. "Brunei Darussalam: Diversifying is hard to do". global-briefing.org. Retrieved December 8, 2016.
  10. ^ "Report for Selected Countries and Subjects". Retrieved 2018-09-09.
  11. ^ "Brunei's Economy to Diversify". - InvestAsian. Archived from the original on 7 February 2015. Retrieved 4 March 2015.
  12. ^ Maierbrugger, Arno. "Brunei bracing for tougher times after oil joyride | Investvine". Investvine. Retrieved 2016-03-02.
  13. ^ "Archived copy". Archived from the original on 2010-08-31. Retrieved 2011-05-02.CS1 maint: Archived copy as title (link)
  14. ^ http://news.brunei.fm/2010/05/26/hm-launches-methanol-plant-opening/ | Official Launching of Brunei Methanol Company
  15. ^ Hadi Dp Mahmudbandar Seri Begawan (2009-08-01). "Brunei pioneers national halal branding". Bt.com.bn. Archived from the original on 2009-08-02. Retrieved 2009-12-30.
ASEAN–China Free Trade Area

The ASEAN–China Free Trade Area (ACFTA), also known as China–ASEAN Free Trade Area is a free trade area among the ten member states of the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China.

BIMP-EAGA

The East ASEAN Growth Area (BIMPT-EAGA) is a subregional economic co-operation initiative in Southeast Asia. It has five members: Brunei, Indonesia, Malaysia, the Philippines and Timor Leste. It was founded in Davao City.

Bank Islam Brunei Darussalam

Bank Islam Brunei Darussalam is an Islamic Bank in Brunei. Established in 2005 with the merger of Islamic Bank of Brunei and Islamic Development Bank of Brunei, it is based in Bandar Seri Begawan.

Brunei Museum

The Brunei Museum is the national museum of Brunei located at Kota Batu near the capital city of Bandar Seri Begawan. The museum has exhibits of Islamic art, historical period of the 16th century and archaeology and ethnography. It is the largest museum in Brunei.The museum published the first Brunei Museum Journal, an academic journal in 1969, which is an annual feature now.

Brunei dollar

The Brunei dollar (Malay: ringgit Brunei, currency code: BND), has been the currency of the Sultanate of Brunei since 1967. It is normally abbreviated with the dollar sign $, or alternatively B$ to distinguish it from other dollar-denominated currencies. It is divided into 100 sen (Malay) or cents (English). The Brunei dollar is issued by the Autoriti Monetari Brunei Darussalam (Monetary Authority of Brunei Darussalam).

Under a Currency Interchangeability Agreement in 1967, the Brunei dollar is interchangeable with the Singapore dollar at par. As such, the Brunei dollar is accepted in Singapore as "customary tender"; likewise, the Singapore dollar is accepted for payments in Brunei.

Brunei pitis

The pitis was a currency of Brunei last issued in 1868 which circulated into the 20th century. It is also referred to as the picil by Antonio Pigafetta and some variants of it were referred to as the kue and the paku (English: piece). It was later replaced by the Straits dollar in Brunei, which is valued at 4000 pitis or 800 paku and at par with the Spanish dollar.

Coins of the Brunei dollar

The coins of the Brunei dollar are part of the physical form of current Brunei currency, the Brunei dollar. They have changed through time along with Brunei itself. A British protectorate from 1888 until 1983, it is currently an independent member of the Commonwealth of Nations.

Fishing industry in Brunei

The fishing industry in Brunei is one of the largest contributors of the country’s revenue. Fishing is a major source of protein in the diets of the Brunei people. The coastal location on the island of Borneo makes it an ideal location for commercial and subsistence fishing.

Most of the fishing grounds in Brunei are in proximity to the mangrove swamps of Brunei estuaries where there are abundant nutrients for fish to reproduce. Some rare marine species have been captured locally, like the recent blackish green toman caught by local fish enthusiasts by using modern fishing technology.Many Bruneians live in Kampong Ayer or Water Village, an area of Brunei's capital city, Bandar Seri Begawan, where houses built on stilts above the Brunei River grant easy access to the open water.

Large scale commercial fishing usually involves exporting fresh fish caught to neighbouring countries like China and Taiwan like the recent breeding of the highly demanded fish species like the mouse grouper and coral trout in which the market price is B$160 per kilogramme if sold to China and Taiwan. Small scale commercial fishing usually involves the selling of fish caught in the wet market.

Garay (ship)

Garay were traditional native warships of the Banguingui people in the Philippines. In the 18th and 19th centuries, they were commonly used for piracy by the Banguingui and Iranun people against unarmed trading ships and raids on coastal settlements in the regions surrounding the Sulu Sea. The name means "scattered" or "wanderer" in the Sama language of the Banguingui.

Islamic economics

Islamic economics (Arabic: الاقتصاد الإسلامي‎) is a term used to refer to Islamic commercial jurisprudence (Arabic: فقه المعاملات‎, fiqh al-mu'āmalāt).

Islamic commercial jurisprudence entails the rules of transacting finance or other economic activity in a Shari'a compliant manner, i.e., a manner conforming to Islamic scripture (Quran and sunnah).

Islamic jurisprudence (fiqh) has traditionally dealt with determining what is required, prohibited, encouraged, discouraged, or just permissible, according to the revealed word of God (Quran) and the religious practices established by Muhammad (sunnah). This applied to issues like property, money, employment, taxes, along with everything else. The social science of economics, on the other hand, works to describe, analyse and understand production, distribution, and consumption of goods and services, and studied how to best achieve policy goals, such as full employment, price stability, economic equity and productivity growth.In the mid-twentieth century, campaigns began promoting the idea of specifically Islamic patterns of economic thought and behavior. By the 1970s, "Islamic economics" was introduced as an academic discipline in a number of institutions of higher learning throughout the Muslim world and in the West. The central features of an Islamic economy are often summarized as: (1) the "behavioral norms and moral foundations" derived from the Quran and Sunnah; (2) collection of zakat and other Islamic taxes, (3) prohibition of interest (riba) charged on loans.Advocates of Islamic economics generally describe it as neither socialist nor capitalist, but as a "third way", an ideal mean with none of the drawbacks of the other two systems.

Among the claims made for an Islamic economic system by Islamic activists and revivalists are that the gap between the rich and the poor will be reduced and prosperity enhanced by such means as the discouraging of the hoarding of wealth,

taxing wealth (through zakat) but not trade, exposing lenders to risk through Profit sharing and venture capital,

discouraging of hoarding of food for speculation,

and other activities that Islam regards as sinful such as unlawful confiscation of land. Critics (Timur Kuran, Feisal Khan) have described it as primarily a "vehicle for asserting the primacy of Islam", with economic reform being only a secondary motive.

Japanese government-issued dollar in Malaya and Borneo

The Japanese government-issued dollar was a form of currency issued for use within the Imperial Japan-occupied territories of Singapore, Malaya, North Borneo, Sarawak and Brunei between 1942 and 1945. The currency was also referred to informally (and with more than a trace of contempt and derision) as banana money (Malay: duit pisang), named as such because of the motifs of banana trees on 10 dollar banknotes. The Japanese dollar was in widespread use within the occupied territories where the previous currency became scarce. The currency were referred to as "dollars" and "cents" like its predecessors, the Straits dollar, Malayan dollar, Sarawak dollar and British North Borneo dollar.

The Japanese dollar was one of several forms of Japanese invasion money issued throughout the newly-expanded Empire of Japan. Similar currencies were issued in Burma (as the Japanese rupee), the Dutch East Indies (as the Japanese gulden/roepiah), the Philippines (as the Japanese peso) and various Melanesian and Polynesian territories (as the Japanese pound).

List of Brunei-related topics

This is a list of topics related to Brunei.

List of banks in Brunei

This is a list of banks in Brunei.

Malaya and British Borneo dollar

The Malaya and British Borneo dollar (known as the ringgit in Malay, Jawi: رڠڬيت) was the currency of Malaya, Singapore, Sarawak, North Borneo, Brunei and Riau archipelago from 1953 to 1967 and was the successor of the Malayan dollar and Sarawak dollar, replacing them at par. The currency was issued by the Board of Commissioners of Currency, Malaya and British Borneo. Prior to 1952, the board was known as the Board of Commissioners of Currency, Malaya.

The Malaya and British Borneo dollar was used in Malaya after independence in 1957, and in Malaysia after its formation in 1963, as well as in Singapore after its independence in 1965. After 1967, the two countries and Brunei ended the common currency arrangement and began issuing their own currencies. However, the Malaya and British Borneo dollar continued to be legal tender until 16 January 1969. The currency was also being used in the Riau Archipelago in Indonesia prior to 1963.

Monetary Authority of Brunei Darussalam

The Monetary Authority of Brunei Darussalam (Malay: Autoriti Monetari Brunei Darussalam, abbreviated as AMBD) is the central bank of Brunei. It was established under the Autoriti Monetari Brunei Darussalam Order, 2010, and began operations on January 1, 2011. It succeeded the Brunei Currency and Monetary Board.

Outline of Brunei

The following outline is provided as an overview of and a topical guide to Brunei:

Brunei is a sovereign country located on the north coast of the Island of Borneo in Southeast Asia. Apart from its coastline with the South China Sea it is completely surrounded by the state of Sarawak, Malaysia, and is separated into two parts by Limbang, which is part of Sarawak.

Brunei, the remnant of a very powerful sultanate, regained its independence from the United Kingdom on 1 January 1984.

Straits dollar

The Straits dollar was the currency of the Straits Settlements from 1898 until 1939. At the same time, it was also used in the Federated Malay States, the Unfederated Malay States, Kingdom of Sarawak, Brunei, and British North Borneo.

Wawasan Brunei 2035

Wawasan Brunei 2035 (Vision Brunei 2035) is a plan to reduce Brunei's dependence on oil and gas sectors, diversify its economy, and develop public service sectors such as health, education, infrastructure, recreation, financial sector and tourism.

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