Achieving the ASEAN Economic Community 2015: Challenges for Member Countries and Businesses

12. ASEAN Economic Integration: Challenges to Brunei Businesses

12 ASEAN Economic Integration: Challenges to Brunei Businesses Pushpa Thambipillai Within ASEAN (Association of Southeast Asian Nations), Brunei Darussalam occupies a distinct position mainly as a result of its domestic characteristics. Thus its actions towards the ASEAN Economic Community (AEC) and regional economic integration are guided in some instances, and hindered in other instances, by those special features inherent in its political, sociocultural, and economic systems (see Table 12.1). Being one of the original six of the ASEAN grouping, Brunei has never wavered in its support for common political-security, economic, and social policies that could contribute towards ensuring a peaceful and developed region. However, the nature of its own environment does not render it a lead player, let alone an active player. Brunei is the smallest member, with an area of 5,765 square kilometres and a population of only about 400,000. In addition, its economy is dependent on the oil and gas sectors which together accounted for about 96 per cent of its total export earnings in 2009. This overreliance on the hydrocarbon contribution has had a negative impact on the general trend of economic 182 Pushpa Thambipillai activity in the state, and Brunei has only in the last few years taken serious steps to reduce its dependence by seeking a more diversified economic base. Non-oil exports are negligible, and thus Brunei may not be able to enjoy the full advantage of the regional economic integration. On the other hand, as a country with little agricultural and manufacturing of its own, it is able to enjoy all the benefits of a free trade area as it imports a wide variety of goods, about 51 per cent of which come from its ASEAN partners. It also stands to gain from the trade in services as local and foreign firms will be able to operate under the AEC initiative if they are located in Brunei. Government interest in and support for the AEC have been way ahead of the economic realities of the country and at times it appears that the public enthusiasm and business participation are two different carriages running along parallel tracks. Both public and private sectors are of course committed to increasing economic activity and contributing to increased income. Next only to Singapore within ASEAN in its openness and low or zero tariff rates, there were nevertheless muted murmurings among local entrepreneurs when AFTA first came into force among the original six. When the China-ASEAN Free Trade Agreement was introduced, there was initial excitement, which dissipated later when it was perceived to be an unequal engagement, dominated by the bigger and more experienced partner state, leaving the local TABlE 12.1 Brunei Darussalam Key Indicators, 2010 Area (square kilometres) 5,765 Population 414,000 Citizen 268,000 No. of Permanent Residents 33,000 No. of Temporary Residents 112,000 No. of Labour, Employed 199,000 Unemployment (%) 2.7 GDP per capita (2009) B$40,700 Source: Department of Economic Planning and Development, Brunei Darussalam, Brunei Darussalam Key Indicators 2011 . ASEAN Economic Integration: Challenges to Brunei Businesses 183 enterprises exposed even before they had claimed a viable status within the Brunei context. The Brunei Economy Brunei is yet to establish itself either as an agricultural, industrial, or service-centred economy. If not for its exports of crude oil and gas that expanded significantly since the 1970s, it would not have been able to afford the increasing demands for imported goods and services, in the absence of substantial foreign or local direct investments. Non-tariff barriers in some sectors have also discouraged external participation in certain industrial sectors, while the small home market and the absence of economies of scale are further discouragements. Thus the government has become the largest domestic player, including being the sole source of national income by holding a joint ownership with the Royal Dutch Shell Company in exploiting hydrocarbon resources. The World Economic Forum’s Global Competitiveness Index groups Brunei in what it refers to as Stage 2 economies, where states are dependent on product exports. Brunei ranks an admirable 28th out of 139 states on its overall performance, despite averaging low points for certain fundamental indicators.1 Since 2007 Brunei has been promoting its long-term development plan (Wawasan 2035, or Vision 2035) that should alter some of the sluggish aspects of its economic development. The current five-year National Development Plan (2007–12) aims to, along...