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Middle EastAugust 1 2004

Economic evolution

The Brunei Economic Development Board is tasked with overseeing the diversification of the country’s economy and raising its international foreign direct investment profile. Restructured in 2001 as a corporate body, the BEDB is staffed by senior government officials and prominent business leaders and provides a one-stop shop for private investors in Brunei. The Banker spoke recently with its chairman, Pehin Dato Haji Mohammad Haji Daud.
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Q What is the economic outlook for Brunei this year?

A I would say it’s looking good. We’re an oil and gas-based economy and oil prices have gone up considerably and that’s good news for Brunei. So the outlook is extremely good. There is going to be plenty of money coming into the kitty.

Q What is your strategy for diversification of the economy away from oil and gas?

A The object is to attract foreign direct investment into the country. We have a two-pronged strategy to develop an industrial site at Sungei Liang for manufacturing, where we hope to introduce petrochemicals as well as a heavy industry site. Currently, we have an aluminum smelting company that’s interested in setting up there. We also want to develop a small island near our port into a global seaport so that we can attract shipping to come here and use it as a container hub.

That’s one prong. The other is to develop business clusters so that there will be more jobs created in various sectors. These will be financial services, hospitality and tourism and communications.

Q What are the strengths that Brunei has to offer private investors coming here?

A In the case of downstream industries, we have a large reserve of gas that is required for feedstock for petrochemical industries. Of course, the gas is a source of energy for the aluminum smelting. Another aspect is the investment climate in Brunei, which is quite attractive at the moment. We have a sustainable economic engine in the oil and gas that are key drivers. Secondly, we have economic and political stability, our economy has always been strong and we have no foreign debts. We have a well-educated population who benefit from a UK-based education system. People can always increase their skills by going overseas to learn. Then we have a strategic location in south-east Asia, right in the middle of the region. That’s a good position to be in. We also have excellent infrastructure, not only physically in roads, an airport and communications, but also in the legal and business framework.

Q How big is the private sector in Brunei and is it expanding? Is it mostly foreign?

A The private sector is small at the moment, as you might expect. But it is definitely growing. There are more commercial centres emerging, more business being generated and, hopefully – with our business diversification strategy – the private sector will play a leading role in supporting our projects. We hope as many local [businesses] as possible will come of age, but we may attract foreigners as well.

Q Some observers in Brunei feel that the pace of diversification is too slow. How do you respond to such comments?

A Well, we have only been going for two and a half years in our current form. If I was them [the observers], I’d like to see things sprouting up everywhere. But in reality, it takes more time to do what you want to achieve. We are doing our very best to speed things up, but you have to do it the proper way. What we are trying to do is introduce world-class industries, so you shouldn’t try to rush things and botch up everything.

Brunei Shell is one of the biggest investors in the country, along with Mitsubishi in LNG facilities. We also have foreign investors coming into the country, we see interest in smelting and petrochemicals, as well as a cement mill here that has foreign investment. Industrial chemicals are produced here, also textiles in the form of manufacturing and production of clothing. Then there’s furniture which is starting here, and plastics and toys, which is something for the future.

Q How about financial services – do you see potential for growth here?

A Well, the Ministry of Finance is leading in this area, but I do believe this is a sector that has potential to grow here. It is one of the business clusters that we’re trying to grow and we hope to generate more interest in this sector.

Q What are your medium-term targets for FDI into Brunei? What is your competition for this investment?

A We are trying to generate $4.5bn in foreign investment in our various projects by 2008. We have to be ambitious otherwise, if we’re not aggressive enough, we won’t achieve our objectives. If we look around south-east Asia, there are countries like Singapore and Malaysia that are always aggressive in trying to attract foreign investors. Then there are latecomers like Vietnam and Cambodia. In terms of competitiveness, I would probably put Brunei somewhere in the middle. I think we are in a good position to attract the foreign investors that we want to come in.

Q Brunei and Malaysia have yet to resolve a long-running dispute over ownership of a major offshore oilfield. Does this affect your economic plans?

A I hope not. This is just one field that is in dispute, and I am sure there are other reserves. Things are not that bleak. Governments of both countries are working hard to try to solve the problem for each other’s benefits. It is a disputed area. Malaysia has its own perception about its own territory and we have ours. The two perceptions clash in the middle so we have this overlapping claim. Of course, you find many overlapping claims in the South China Sea. In our part of the [disputed] field, we are continuing with business as usual.

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