- Brunei Darussalam:Making Strides with a Renewed Focus on the Future
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Brunei Darussalam, one of the smallest yet richest countries in Southeast Asia with a total population of nearly 450,000, has made remarkable economic progress as a result of its reforms. Some indications of its achievements are presented in this chapter. The 2018 ASEAN+3 Regional Economic Outlook (AREO) projected that Brunei would have strong growth in gross domestic product (GDP), rising from 0.6 per cent in 2017 to 1.6 per cent and 3.4 per cent in 2018 and 2019 respectively. Yet, according to a forecast of the overall growth rate of real GDP among the ten Southeast Asian countries, Brunei experienced the slowest growth rate this decade.1 The country's average GDP annual growth rate — greatly affected by world prices and the local production of oil and gas — from 2004 to 2018 was 0.13 per cent.
Despite the challenges associated with the decline in energy reserves and falling world oil prices, the Brunei government and industrial players remain optimistic about the future of the country, in view of the rapid development of the global economy and the continual enhancement of the life energy requirement, which in turn increases the global demand for oil and gas. A decade after the 2008 global financial crisis, the casualties of Brunei's near economic downturn are [End Page 85] slowly fading from memory. Oil exploration and drilling activities are actively in progress, with a continued focus on accessing more resources for the development of the overall economy, in line with the country's need for diversification strategies that can deliver sustained, job-intensive and inclusive growth.
Brunei's own experience of sustainable economic growth underscores the importance of economic diversification and broad-based economic development governed by prudent policy and regulation. Economic diversification has been a key theme of Brunei's long-term strategy since the launch of its first development plan, the National Development Plan 1953–1958. While there is reason to be optimistic about the country's future economic prosperity because the government has shown progress in its basic policy of diversifying the economy away from oil and gas, the challenge is how to wean the country off its debt drip without intensifying an economic slowdown.
During the Legislative Council Meeting in March 2018, the second minister of finance and economy indicated that, to promote the country's economic growth, the government will continue to focus on fiscal consolidation and fiscal sustainability policies by emphasizing cost-effectiveness, a pro-business approach and prudent spending, without affecting the level of service, productivity and finances of the government in the long-term. He also highlighted five renewed thrusts for Brunei's fiscal year 2018/19 budget: prudent spending, ease of doing business, enhancing productivity through innovation, creating employment opportunities and capacity-building, and preserving public welfare. This chapter briefly reviews the extent to which Brunei's current economic activities focus on each of these thrusts, along with a discussion on key challenges that stand in the way of these goals being achieved.
Cutting Debts and Deficits by Cutting Spending
Debts and deficits are an expenditure problem. Even if the Brunei government increases its investments to help local businesses and industries, continues social spending and the development of infrastructure, there is more to fiscal prudence than a return to surplus. Through prudent fiscal management, the Brunei government is committed to reducing the country's debt-to-GDP ratio, eliminating deficits and returning to balanced budgets. To date, Brunei's debt-to-GDP ratio is ranked the lowest, by far, among Southeast Asian countries.2 The government has responded fairly quickly to reducing the nation's debt burden. The country's debt-to-GDP ratio decreased from 2.95 per cent in 2015 to 2.83 per cent in 2017 (Table 1), and it is projected to be approximately 2.40 per cent in 2018. [End Page 86]
A higher debt-to-GDP ratio is not necessarily a bad thing, and this indicator has been used to maintain a sustainable financial...