BGA Asia StreetBeat is the company’s new mini-series that takes an on-the-ground pulse of Indo-Pacific markets from its leaders. In each segment, we periodically ask the heads of each of the 26 markets in which we operate questions on what clients should watch: one on macro developments; one on sectors and industries; and one on under-noticed or over the horizon developments.
For this segment of BGA Asia StreetBeat, we spoke to BGA Brunei Senior Advisor Fauziah Talib, after a busy year for the country which included its holding of the annually-rotating ASEAN chairmanship.
What is one political or economic development that remains important for businesses to watch in the coming months?
Brunei’s income is largely derived from oil exports and according to the BP Statistical Review of World Energy 2021, Brunei’s oil reserves will likely run out in 27 years. Pair this scenario of depleting oil reserves with the country’s vulnerability to fluctuating energy prices, and you get the sense that Brunei economic diversification strategic plan may possibly be at a critical juncture.
For the last few decades, Brunei has recognized the importance of economic diversification to build resilience, with implemented policies to increase contribution to GDP from non-oil and gas sectors such as agriculture, forestry, fishing, aquaculture and banking. Efforts were also focused on establishing the downstream oil and gas sector that included the Brunei Methanol Company Sdn Bhd (BMC) methanol plant in operation since 2010, the multi-billion-dollar Pulau Muara Besar (PMB) Refinery and Petrochemical Plant operated by Hengyi Industries Sdn Bhd since the end of 2019 and the Brunei Fertilizer Industries Sdn Bhd (BFI) since 2021/2022.
In recent years, the country has been experiencing low economic growth compared to neighboring economies, with high unemployment rate and low non-oil and gas exports. The recently released ASEAN+3 Macroeconomic Research Office’s (AMRO) annual consultation report spotlighted the need for a strategic plan that broadens Brunei’s sources of income beyond oil, and the next few months may see proactive response in terms of expediting diversification policies and increased activities to support this.
What is a sector within the economy that you think clients should carefully monitor in the coming months?
In line with Brunei’s vision toward sustainable economic development, the country envisions to develop the non-oil and gas sector by discovering new economic activities as well as strengthening five priority sectors: downstream oil and gas, food, tourism, information and communications technology (ICT) and services.
However, it would be prudent to focus on the ICT sector as this has seen more developments as a response to the pandemic. This includes digital health apps, systems for early warning and risk assessment, the developing interest in digital literacy and fintech and the encouragement for companies (especially small and medium enterprises) to leverage technology. Specifically, the focus would be on connectivity, digital policies and cybersecurity to benefit from the Fourth Industrial Revolution (IR 4.0) opportunities.
What is one relatively more under-noticed development or trend on the ground that you think international businesses with an interest in potentially investing in Brunei should pay more attention to in terms of their planning?
Dependence on oil and gas has meant that for decades, employment has been mainly in the government civil service and oil and gas industries. This has limited the role of the private [non-oil and gas] sectors. In addition, high wages combined with low productivity have put the private sector at a competitive disadvantage.
To support diversification, the balance between public and private sectors must be recalibrated. However, lack of critical mass in the latter thus far has meant that the public sector needs to be more heavily involved in the process. Various measures will be required to facilitate the transition, such as public-private partnerships (PPPs) and more effective coordination and implementation of policies across the government departments and agencies.