Sunday, May 19, 2024
English English French Spanish Italian Korean Japanese Russian Hindi Chinese (Simplified)

As the third-largest oil producer in Southeast Asia and the fourth-largest producer of liquefied natural gas in the world, Brunei is blessed with vast oil and gas reserves. The country has long enjoyed impressive per capita income and living standards, second only to Singapore within Southeast Asia.

The Sultanate has generally managed its natural resource wealth well, enabling the establishment of a comprehensive welfare system that is virtually unmatched in the region. This system includes benefits such as income tax waivers, free education and healthcare for its small population of around 450,000 people.

However such mineral reserves are inherently depletable. This realisation has forced Bruneian policymakers to diversify the economy. One of the most concrete manifestations of Brunei’s diversification is the Wawasan Brunei 2035 (Brunei Vision 2035), a long-term development plan introduced in 2007 to reduce dependence on hydrocarbon wealth and lift living standards. Pivotal to the pursuit of Wawasan Brunei 2035 is the drive to attract foreign direct investment (FDI).

China — especially since the 2013 launch of its Belt and Road Initiative — has become an appealing partner. Despite their latecomer status, Chinese firms have gradually jacked up their presence in the Sultanate. This can be partially attributed to the establishment of the Brunei–Guangxi Economic Corridor in 2016.

This initiative aims to enhance cooperation between Brunei and the Guangxi Zhuang Autonomous Region of China. It focuses on sectors such as food processing, pharmaceuticals, cosmetic biotechnology research and healthcare products. Chinese companies have also invested in sectors like hydrocarbons, ICTs, fisheries, agriculture, logistics and infrastructure projects.

The largest chunk of Chinese FDI has gone to a multibillion-dollar refinery and petrochemical complex in Pulau Muara Besar. It is a joint venture between the Bruneian government and Zhejiang Hengyi Group, a private Fortune 500-listed enterprise. Hengyi’s investment led to the entry of several Chinese construction companies to facilitate infrastructure construction.

The impact has been significant — its links with other sectors resulted in an estimated contribution of about 1 per cent to the country’s GDP growth. The project also had a positive effect on the job market, creating approximately 3210 additional jobs in 2019 alone. Out of these, at least 35 per cent were taken up by Bruneians. These job opportunities spanned diverse sectors, including construction, trade, hospitality and manufacturing.

Several points can be inferred. First, this is fundamentally a hydrocarbon-related project, albeit one that involves more value-added processing. A cynic could even claim Hengyi’s investment is merely a more advanced version of the country’s very first refinery, established in 1929 as a joint venture between the government and Royal Dutch Shell.

The project also does little to break Brunei’s technological dependence on foreign firms. This finding underlines the ‘sticky’ challenges in transitioning away from hydrocarbons. It also dampens the euphoria behind China’s role in facilitating the economic progress of fellow Global South economies and Wawasan Brunei 2035’s catalytic influence in steering Brunei away from its old industrial pathway.

Second, there is a heavy state imprint in the project. Damai Holdings Ltd, a wholly-owned subsidiary of a Bruneian government trust sub-fund, holds 30 per cent equity, with the remaining stake taken up by Hengyi. In addition to its role as a regulator, this deal has deepened the Bruneian government’s role in the state-heavy economy. By the same token, it has complicated the task of empowering the nation’s traditionally passive private sector.

This vicious cycle of a defanged private sector operating under the shadow of an activist state, cooperating with FDI in strategic projects, is a feature of the Bruneian economy. It goes back to how capitalist development was formulated even before the Sultanate’s full independence in the 1980s.

Adding another layer of complexity is Brunei’s meagre domestic market. This incentivises firms to prioritise lucrative export avenues like China, North America and wider Southeast Asia. The lack of interest from these firms in the local market makes it difficult to nurture domestic entrepreneurship and innovation.

Brunei’s pursuit of Wawasan Brunei 2035 and its courting of Chinese FDI present opportunities and challenges. While Chinese investment has provided a lifeline during economic downturns, it has also reinforced Brunei’s dependence on its hydrocarbon resources.

To achieve sustainable economic diversification, Brunei must carefully balance the role of the state with efforts to empower its domestic private sector and explore new economic frontiers. The apparent breakthrough of certain Middle Eastern petrostates into hitherto unorthodox activities, such as aviation management and luxury retail, can offer Bruneian economic planners some food for thought.

While Middle Eastern authorities certainly played a crucial role in some of these deals, those that have enjoyed the most commercial success employ a ‘Whole-of-Nation’ approach. Rather than simply bankrolling and operating such ventures, a ‘Whole-of-Nation’ collaborative approach marshals resources from multiple stakeholders, from within the region and beyond.


* indicates required

The Enterprise is an online business news portal that offers extensive reportage of corporate, economic, financial, market, and technology news from around the world. Visit to explore daily national, international & business news, track market movements, and read succinct coverage of significant events. The Enterprise is also your reach vehicle to connect with, and read about senior business executives.

Address: 150th Ct NE, Redmond, WA 98052-4166

©2024 The Enterprise – All Right Reserved.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept