Regional Outlook: Southeast Asia 2004-2005

The ASEAN-10

62 ECONOMIC OUTLOOK Brunei THE ASEAN-10 Lee Poh Onn • Mya Than • Martin P.H. Panggabean • Nick J. Freeman • Denis Hew • Aladdin D. Rillo • Choy Keen Meng • Sakulrat Montreevat T hings are looking brighter for Brunei in 2004 and 2005. Many internal as well as external dynamics offer promising prospects that, if fully realised, could mean that Brunei would be one step closer to achieving a truly diversified and growing economy in the coming years. In mid-January 2003, Brunei unveiled an ambitious five-year plan of US$4.5 billion (B$7.8 billion) aimed at diversifying its oil-dependent economy and attracting new foreign investments. Such a plan is expected to bear fruit in the shorter term but will only come into full play by 2008. The above plan is also expected to create 6,000 new jobs for Bruneians; if fulfilled, this should be a welcome relief for alleviating the current state of unemployment in the economy and dependence on public sector employment. The government sector employs about 75 per cent of Brunei’s workforce and, officially, Brunei’s unemployment stands at around 5 per cent, although the real figure has often been considered to be higher. A global mega port hub for container handling at Pulau Muara Besar and a 500megawatt power plant in Sungai Liang are also among some of the projects that have been proposed by the Brunei Economic Development Board (BEDB), with feasibility studies expected to be completed by end 2003. However, it is important to note that Brunei’s lack of experience in the shipping industry, strong port competition from Malaysia and Singapore, and the development of a neighbouring smelter in Sarawak, Malaysia, are factors that may work against reaping the full growth potential of these ventures. The BEDB has also proposed a strategy of developing downstream and manufacturing industries, notably petrochemicals, halal food, and tourism. In spite of the global economic downturn through most of 2002, Brunei received a significantly higher flow of foreign direct investment: US$1.04 billion as opposed to US$526 million in 2001. Brunei is also expected to receive around the same amount for 2003, and a slightly higher amount in 2004 if the world economy picks up. Barring severe competition from the Sarawakian smelting plant, the recent agreement by Alcoa and the BEDB to launch a Memorandum of Understanding (MOU) to examine the feasibility of establishing a smelting plant in the country is another positive that is in line with Brunei’s intention to diversify its economy. Alcoa is U.S.-based and one of the world’s largest aluminium producers and is considering constructing a US$1.5 billion aluminium smelter in Brunei. The feasibility study is expected to be completed in two years’ time and will be carried out in two phases. The BEDB has also signed a MOU with ACI Corporation Ltd to establish a billion-dollar tyre recycling plant over the next five years. Such a venture is expected to generate 1,220 jobs for Bruneians. 63 THE ASEAN-10 Alcatel, a leading French conglomerate and the world’s largest telecom infrastructure provider, set up office in Brunei in September 2003, teaming with Brunei’s DataStream Technology Sdn Bhd to roll out the first General Packet Radio Services (GPRS), and Evolved Data for GSM Evolution (EDGE) in the country as part of Brunei’s efforts to upgrade its existing mobile phone infrastructure. Brunei is considering to sign free trade agreements (FTAs), covering trade, services, and investment, with the United States and Japan — two of its largest trading partners. Brunei has already signed a Trade and Investment Agreement (TIFA) with the United States in November 2002, and contains a provision that this may be a preamble to an FTA when both countries are ready for such an agreement. In 2002, Brunei’s exports to the United States and Japan were B$378.8 million and B$1.72 billion, while imports were B$522.3 million and B$382.2 million respectively. Brunei continues to be a haven of security by adopting a moderate Islamic stance and has received praise from the United States for its efforts. For example, the authorities acted swiftly to curb extremist religious cult activities in September 2003, by detaining twenty people (locals and Malaysians) believed to be linked to the Al-Ma’unah (Brotherhood on Inner Power) Malaysian group. Externally, both the United States and Japan have shown signs of recovery that would certainly bode well for...