Brunei Darussalam: Further Attempts at Economic Diversification


AVM Horton

In a titah marking New Year 2006 Sultan Hassanal Bolkiah identified unemployment as a potential threat to social stability in the sultanate. As a solution to the problem His Majesty looked to the private sector to generate more jobs. This would have the twin additional advantages of assisting economic diversification (the country's long-term goal) and of reducing reliance on the public sector (BBSO 1.1.06; PB 4.1.2005:2). Twelve days later the Prime Minister's Office (headed by His Majesty himself) announced that it was establishing an NBD$250 million 'Human Resources Fund Project'. The aims are (1) to raise the country's human-resource capability to the level obtaining in developed countries; (2) to fulfil the needs of economic, political and social development; (3) to inculcate continuous learning among the workforce; (4) to achieve full employment; and (5) to reduce dependence on foreign workers. Some of the programmes, such as a scholarship scheme, have already been implemented (BBO 13.1.06).

The newly established National Development Party praised the titah, but called on the private sector to be given more support; otherwise, the population would be dependent for ever on the public sector to sustain a living. For its part, the NDP, through Agrinduz Development Sdn Bhd, intends to promote agriculture and agri-based industry (BBO 3.1.06).

The hydrocarbon sector itself remains in rude health. Going into 2006, world oil prices remained comfortably ensconced above $US60 per barrel thanks particularly to heightened demand for energy in the PRC and India. In consequence exploration activity in many countries has been boosted (BBO 16.1.06). Three major developments in NBD might be cited here:

First, on 20 December 2005 the Borneo Bulletin reported that the Brunei Shell Petroleum Company (BSPC) had achieved its fifth successive oil discovery in the Seria Shallow Marine North Flank, representing a one hundred percent strike rate in this area. Evaluation work is proceeding to determine the size of the reservoir. Production might commence two or three years from now. At present, the Seria field generates 25,000 barrels per day. Up to five more wells are planned here in 2006-7 from a land-based drilling location (BBO 20.12.05; GBOW ON 21.12.05).

Secondly, it was reported that the start of production from Phase III of the BSPC's Champion West field, located some fifty-five miles offshore, is two months ahead of the scheduled February 2006 deadline. Cutting-edge technology is used. Dr Grahaeme Henderson, BSPC's Managing Director, said the find is 'one of the largest undeveloped resources' in NBD and would deliver oil 'for the next twenty years and beyond'. Early indications suggest that the well is yielding 16,700 barrels per day, currently worth more than one million US dollars. It is also hoped that Champion West will account for almost a quarter of the BSPC's gas production by 2010 (BBO 11.1.06, 16.1.06).

Thirdly, the right to prospect for oil and gas in two new offshore blocks ('L' and 'M') was put out to tender in August 2005, applications to be received by 3 January 2006. On behalf of the government, the Brunei National Petroleum Company is currently assessing bids submitted by various multinational firms and the successful candidate will be announced shortly. Registered on 14 January 2002, 'PetroleumBRUNEI' (as the BNPC is generally known) is wholly-owned by the state. It holds the rights to four exploration blocks (including the two just mentioned) covering an area of six thousand square miles and has been given the task of looking after the nation's commercial interests in the hydrocarbon sector. PetroleumBRUNEI's current projects include a joint venture with Mitsubishi Gas Chemicals and the Itochu Corporation for the construction of a methanol production plant in NBD (BBO 9.1.06).

Besides successful exploration activities, conservation measures are also on the agenda. In mid-December officials of the Department of Electrical Services, which now comes under new Ministry of Energy, began to visit factories as part of a push to cut down on electricity usage in a country where consumption (per capita, presumably) is said to be among the highest in the region. The department has complained that it is owed NBD$250 million in electricity dues both by government agencies and members of the public (BBO 20.12.05).

NBD's automobile sales furnish an index of the wellbeing of the local economy, which tends in turn to mirror the world oil price. Units shifted in the first eleven months of 2005 (13,553) already exceeded the total (13,200) for the whole of 2004. Toyota has a market share of some twenty-three per cent, with Hyundai in second place at thirteen per cent. The highest number of annual registrations was recorded in 1997 (14,299) but slumped to a nadir of only 6,189 in 2000 (BBO 25.12.05).

Four points might be made quickly here. First, NBD is one of forty-two countries in the world that have embraced third-generation mobile telephony (BBO 24.12.05). Secondly, on 12 December Microsoft Corporation signed a Memorandum of Understanding with the government for a six-year partnership aimed at assisting the social and economic development of the sultanate (BBO 13.12.05). Thirdly, the popularity of Tamu Kianggeh has increased since its renovation (cf. Asian Analysis, February 2005). The stalls are now more organised, the site is cleaner, and there is a new entrance signboard. Such efforts are hoped to make the market attractive for both local people and tourists alike (BBO 5.1.06). Fourthly, NBD and Japan have agreed to launch consultations early in 2006 for a bilateral Economic Partnership Agreement (BBO 14.12.05).

Continuing with this broader context, in a titah at the inaugural East Asia Summit in Kuala Lumpur in mid-December, His Majesty commended a growing sense of 'togetherness' in Asia, be it in the political, economic and security spheres. Sir Hassanal felt that the creation of the EAS was a logical outcome of existing regional processes, such as the ASEAN Post-Ministerial Conferences. It was believed that EAS would define itself over time and discover the ways in which it could best help to shape the future of the region (BBO 15.12.05).

In a sabda (royal speech ranking below a titah) at the WTO Ministerial Conference in Hong Kong SAR on 16 December, HRH Prince Mohamed Bolkiah, Minister of Foreign Affairs and Trade, stated that his country saw the WTO as 'one of the most important pillars of world order. For us it reflects our people's commitment to multilateralism. By this we mean sharing experiences, learning from each other, and working in partnership'. NBD had 'two simple hopes'. First, it sought further progress towards completing the Doha Round in a spirit of 'fairness'; and secondly that the meeting 'will increase our people's confidence in multilateral action in many other essential areas'. The sultanate sought 'changes that improve day-to-day lives in the developing world' (BBO 17.12.05).

Back at home, the government has launched a mini-campaign against corruption. One objective is to create a climate favourable for FDI in line with the economic diversification objective. Representatives of Chambers of Commerce have also been pressing for an end to 'cumbersome procedures' that obstruct business opportunities (BBSO 18.12.05). The programme is in accordance with recommendations contained in the United Nations' Convention against Corruption, which was signed by NBD in December 2003. Education in corruption-prevention will be included in NBD's school curriculum forthwith. Publication of textbooks and teaching aids is already in hand. The main objectives are to instil in pupils values such as honesty, trust, and sincerity (BBO 6.1.06). HRH the Crown Prince (Al-Muhtadee Billah) took up the baton, personally launching the campaign on 7 January. Corrupt practices, he warned, 'can drag a country towards disaster'. Islam prohibits any such activity; and HRH looked for support from all parties to ensure that the machinery of government functioned cleanly, efficiently and transparently, thereby providing confidence to foreign investors coming into the country (BBSO 8.1.06). Further evidence of the anti-corruption imperative was provided by a series of three talks planned by the Customs and Excise Department in early January (BBO 10.1.06). My own opinion is that such initiatives are unlikely to achieve their goals for as long as NBD retains its unaccountable system of governance, which is the root cause. But should the various measures prove successful, they might help to reduce unemployment, in line with His Majesty's New Year titah.

*(This report has been compiled from reports in the Borneo Bulletin (online) (BBO); Borneo Bulletin Sunday (online) (BBSO); Government of Brunei Daraussalam Official Website (online news) (GBOW ON); and the Pelita Brunei (PB)).

WATCHPOINT: Monitor the anti-corruption programme.


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