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Brunei (06/09)


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For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Brunei Darussalam

Geography
Area: 5,765 sq. km. (2,226 sq. mi.), slightly larger than Delaware.
Cities: Capital--Bandar Seri Begawan.
Terrain: East--flat coastal plain rises to mountains; west--hilly lowland with a few mountain ridges.
Climate: Equatorial; high temperatures, humidity, and rainfall.

People
Nationality: Noun and adjective--Bruneian(s).
Population (2008 est.): 382,000.
Annual growth rate (2007 est., Government of Brunei): 1.8%.
Ethnic groups: Malay, Chinese, other indigenous groups.
Religion: Islam.
Languages: Malay, English, Chinese; Iban and other indigenous dialects.
Education: Years compulsory--9. Literacy (2006)--94.7%.
Health: Life expectancy--men 75.2 years, women 77.8 years. Infant mortality rate (2007 est., Government of Brunei)--7.6/1,000.

Government
Type: Malay Islamic Monarchy.
Independence: January 1, 1984.
Constitution: 1959.
Branches: Executive--Sultan is both head of state and Prime Minister, presiding over a fourteen-member cabinet. Legislative--a Legislative Council has been reactivated after a 20-year suspension to play an advisory role for the Sultan. Judicial (based on Indian penal code and English common law)--magistrate's courts, High Court, Court of Appeals, Judicial Committee of the Privy Council (sits in London).
Subdivisions: Four districts--Brunei-Muara, Belait, Tutong, and Temburong.

Economy
GDP (2008 est., Government of Brunei): U.S. $13.473 billion (BND 19.8054 billion; 2008 Brunei Darussalam Key Indicators--BDKI).
Growth rate (2008 est., Government of Brunei): 0.4%.
Natural resources: Oil and natural gas.
Trade: Exports--oil, liquefied natural gas, petroleum products, garments. Major markets--Japan, Indonesia, Korea, Australia, U.S. Imports--machinery and transport equipment, manufactured goods. Major suppliers--ASEAN, Japan, China, U.S.

PEOPLE
Many cultural and linguistic differences make Brunei Malays distinct from the larger Malay populations in nearby Malaysia and Indonesia, even though they are ethnically related and share the Muslim religion.

Brunei has hereditary nobility, carrying the title Pengiran. The Sultan can award to commoners the title Pehin, the equivalent of a life peerage awarded in the United Kingdom. The Sultan also can award his subjects the Dato, the equivalent of a knighthood in the United Kingdom, and Datin, the equivalent of damehood.

Bruneians adhere to the practice of using complete full names with all titles, including the title Haji (for men) or Hajah (for women) for those who have made the Haj pilgrimage to Mecca. Many Brunei Malay women wear the tudong, a traditional head covering. Men wear the songkok, a traditional Malay cap. Men who have completed the Haj can wear a white songkok.

The requirements to attain Brunei citizenship include passing tests in Malay culture, customs, and language. Stateless permanent residents of Brunei are given International Certificates of Identity, which allow them to travel overseas. The majority of Brunei's Chinese are permanent residents, and many are stateless. An amendment to the National Registration and Immigration Act of 2002 allowed female Bruneian citizens for the first time to transfer their nationality to their children.

Oil wealth allows the Brunei Government to provide the population with one of Asia's finest health care systems. Malaria has been eradicated, and cholera is virtually nonexistent. There are five general hospitals--in Bandar Seri Begawan, Tutong, Kuala Belait, Bangar, and Seria--and there are numerous health clinics throughout the country.

Education starts with preschool, followed by 6 years of primary education and up to 7 years of secondary education. Nine years of education are mandatory. Most of Brunei's college students attend universities and other institutions abroad, but approximately 3,746 (2008) study at the University of Brunei Darussalam. Opened in 1985, the university has a faculty of more than 300 instructors and is located on a sprawling campus overlooking the South China Sea.

The official language is Malay, but English is widely understood and used in business. Other languages spoken are several Chinese dialects, Iban, and a number of native dialects. Islam is the official religion, but religious freedom is guaranteed under the constitution.

HISTORY
Historians believe there was a forerunner to the present Brunei Sultanate, which the Chinese called Po-ni. Chinese and Arabic records indicate that this ancient trading kingdom existed at the mouth of the Brunei River as early as the seventh or eighth century A.D. This early kingdom was apparently conquered by the Sumatran Hindu Empire of Srivijaya in the early ninth century, which later controlled northern Borneo and the Philippines. It was subjugated briefly by the Java-based Majapahit Empire but soon regained its independence and once again rose to prominence.

The Brunei Empire had its golden age from the 15th to the 17th centuries, when its control extended over the entire island of Borneo and north into the Philippines. Brunei was particularly powerful under the fifth sultan, Bolkiah (1473-1521), who was famed for his sea exploits and even briefly captured Manila; and under the ninth sultan, Hassan (1605-19), who fully developed an elaborate Royal Court structure, elements of which remain today.

After Sultan Hassan, Brunei entered a period of decline due to internal battles over royal succession as well as the rising influences of European colonial powers in the region that, among other things, disrupted traditional trading patterns, destroying the economic base of Brunei and many other Southeast Asian sultanates. In 1839, the English adventurer James Brooke arrived in Borneo and helped the Sultan put down a rebellion. As a reward, he became governor and later "Rajah" of Sarawak in northwest Borneo and gradually expanded the territory under his control.

Meanwhile, the British North Borneo Company was expanding its control over territory in northeast Borneo. In 1888, Brunei became a protectorate of the British Government, retaining internal independence but with British control over external affairs. In 1906, Brunei accepted a further measure of British control when executive power was transferred to a British resident, who advised the ruler on all matters except those concerning local custom and religion.

In 1959, a new constitution was written declaring Brunei a self-governing state, while its foreign affairs, security, and defense remained the responsibility of the United Kingdom. An attempt in 1962 to introduce a partially elected legislative body with limited powers was abandoned after the opposition political party, Parti Rakyat Brunei, launched an armed uprising, which the government put down with the help of British forces. In the late 1950s and early 1960s, the government also resisted pressures to join neighboring Sabah and Sarawak in the newly formed Malaysia. The Sultan eventually decided that Brunei would remain an independent state.

In 1967, Sultan Omar abdicated in favor of his eldest son, Hassanal Bolkiah, who became the 29th ruler. The former Sultan remained as Defense Minister and assumed the royal title Seri Begawan. In 1970, the national capital, Brunei Town, was renamed Bandar Seri Begawan in his honor. The Seri Begawan died in 1986.

On January 4, 1979, Brunei and the United Kingdom signed a new treaty of friendship and cooperation. On January 1, 1984, Brunei Darussalam became a fully independent state.

GOVERNMENT AND POLITICAL CONDITIONS
Under Brunei's 1959 constitution, the Sultan is the head of state with full executive authority, including emergency powers since 1962. The Sultan is assisted and advised by five councils, which he appoints. A Council of Ministers, or cabinet, which currently consists of 14 members (including the Sultan himself), assists in the administration of the government. The Sultan presides over the cabinet as Prime Minister and also holds the positions of Minister of Defense and Minister of Finance. His son, the Crown Prince, serves as Senior Minister. One of the Sultan's brothers, Prince Mohamed, serves as Minister of Foreign Affairs.

Brunei's legal system is based on English common law, with an independent judiciary, a body of written common law judgments and statutes, and legislation enacted by the Sultan. The local magistrates' courts try most cases. More serious cases go before the High Court, which sits for about 2 weeks every few months. Brunei has an arrangement with the United Kingdom whereby United Kingdom judges are appointed as the judges for Brunei's High Court and Court of Appeal. Final appeal can be made to the Judicial Committee of the Privy Council in London in civil but not criminal cases. Brunei also has a separate system of Islamic courts that apply Sharia law in family and other matters involving Muslims.

The Government of Brunei assures continuing public support for the current form of government by providing economic benefits such as subsidized food, fuel, and housing; free education and medical care; and low-interest loans for government employees. The Sultan said in a 1989 interview that he intended to proceed, with prudence, to establish more liberal institutions in the country and that he would reintroduce elections and a legislature when he "[could] see evidence of a genuine interest in politics on the part of a responsible majority of Bruneians." In 2004 the Sultan issued amendments to the constitution and re-introduced an appointed Legislative Council with minimal powers. Currently, four of the 29 seats on the Council are indirectly elected by village leaders.

Brunei's economy is almost totally supported by exports of crude oil and natural gas. The government uses its earnings in part to build up its foreign reserves. The Brunei Investment Agency manages the bulk of the nation's foreign investments, which are reported to have reached more than $30 billion. The country's wealth, coupled with its membership in the United Nations, Association of Southeast Asian Nations (ASEAN), the Asia Pacific Economic Cooperation (APEC) forum, and the Organization of the Islamic Conference give it an influence in the world disproportionate to its size.

Principal Government Officials
Sultan and Yang di-Pertuan, Prime Minister, Minister of Defense, and Minister of Finance--His Majesty Sultan Hassanal Bolkiah
Senior Minister--His Royal Highness Crown Prince Billah
Minister of Foreign Affairs--His Royal Highness Prince Mohamed Bolkiah
Ambassador to the United States--Charge d'Affaires Angela Shim
Ambassador to the United Nations--Latif Tuah

Brunei Darussalam maintains an embassy in the United States at 3520 International Court, NW, Washington, DC 20008; tel. 202-237-1838.

ECONOMY
Brunei's economy enjoyed moderate growth in the mid-2000s, primarily due to high world oil and gas prices. Recently, Brunei's growth has fallen sharply. The government estimated a growth rate of 0.4% for 2008. Brunei continues to have one of the lowest GDP growth rates of any ASEAN nation.

Brunei is the third-largest oil producer in Southeast Asia, averaging about 149,837 barrels a day in 2008 (second quarter 2008). It also is the ninth-largest exporter of liquefied natural gas in the world. Like many oil producing countries, Brunei's economy has followed the swings of the world oil market. Economic growth has averaged around 2.8% in the 2000s, heavily dependent on oil and gas production. Oil production has averaged around 200,000 barrels a day during the 2000s, while liquefied natural gas output has been slightly under or over 1,000 trillion btu/day over the same period. Oil production has dropped slightly in recent years, and growth rates have fallen more significantly. Brunei is estimated to have oil reserves expected to last 25 years, and enough natural gas reserves to last 40 years.

Brunei Shell Petroleum (BSP), a joint venture owned in equal shares by the Brunei Government and the Royal Dutch/Shell group of companies, is the chief oil and gas production company in Brunei. It also operates the country's only refinery. BSP and four sister companies--including the liquefied natural gas producing firm BLNG--constitute the largest employer in Brunei after the government. BSP's small refinery has a distillation capacity of 10,000 barrels per day. This satisfies domestic demand for most petroleum products.

The French oil company Total (then known as ELF Aquitaine) became active in petroleum exploration in Brunei in the 1980s. The joint venture Total E&P Borneo BV currently produces approximately 35,000 barrels per day and 13% of Brunei's natural gas.

In 2003, Malaysia disputed Brunei-awarded oil exploration concessions for offshore blocks J and K (Total and Shell respectively), which led to the Brunei licensees ceasing exploration activities. Negotiations between the two countries are continuing in order to resolve the conflict. Two on-shore blocks are being explored following awards to two consortia--one Canadian-led and the other an Australian-led operating consortium. Australia, Indonesia, and Korea were the largest customers for Brunei's oil exports, taking over 70% of Brunei's total crude exports. Other customers like Japan and New Zealand each took around 7% of total crude exports (2008 Brunei Darussalam Key Indicators--BDKI).

Almost all of Brunei's natural gas is liquefied at Brunei Shell's Liquefied Natural Gas (BLNG) plant, which opened in 1972 and is one of the largest LNG plants in the world. Some 90% of Brunei's LNG produced is sold to Japan under a long-term agreement renewed in 1993. According to BLNG, the agreement calls for Brunei to provide over 6 million tons of LNG per year to three Japanese utilities, namely to TEPCo, Tokyo Electric Power Co. (J.TER or 5001), Tokyo Gas Co. (J.TYG or 9531) and Osaka Gas Co. (J.OSG or 9532). The Japanese company, Mitsubishi, is a joint venture partner with Shell and the Brunei Government in Brunei LNG, Brunei Coldgas, and Brunei Shell Tankers, which together produce the LNG and supply it to Japan. Since 1995, Brunei has supplied 700,000 tons of LNG annually to the Korea Gas Corporation (KOGAS) as well. In the second quarter of 2008, total natural gas production reached 0.855 billion cubic feet per day. A small amount of natural gas is used for domestic power generation. Since 2001, Japan remains the dominant export market for natural gas. Brunei is the fourth-largest exporter of LNG in the world (according to the Brunei Economic Development Board) behind Indonesia, Malaysia, and Australia.

The government sought in the past decade to diversify the economy with limited success. Oil and gas and government spending still account for most of Brunei's economic activity. Brunei's non-petroleum industries include agriculture, forestry, fishing, aquaculture, and banking. The garment-for-export industry has been shrinking since the U.S. eliminated its garment quota system at the end of 2004. The Brunei Economic Development Board (BEDB) announced plans in 2003 to use proven gas reserves to establish downstream industrial projects. In 2006, the Brunei Methanol Company, a joint venture between Petroleum Brunei, Mitsubishi, and Itochu, was established. Initial construction on a $400 million methanol plant, fed by natural gas, was started in 2007 and the plant is expected to come on line in 2010. The government has plans to build a power plant in the Sungai Liang region to power a proposed aluminum smelting plant that will depend on foreign investors. A second major project depending on foreign investment is in the planning stage: a giant container hub at the Muara Port facilities. BEDB appointed a port operator, International Container Terminal Services Inc. (ICTSI) from the Philippines.

The government regulates the immigration of foreign labor out of concern it might disrupt Brunei's society. Work permits for foreigners are issued only for short periods and must be continually renewed. Despite these restrictions, the estimated 100,000 foreign temporary residents of Brunei make up a significant portion of the work force. The government reported an estimated work force of 188,000 in 2008, with a derived unemployment rate of 3.7% (BDKI).

Oil and natural gas account for almost all exports. Since only a few products other than petroleum are produced locally, a wide variety of items must be imported. Nonetheless, Brunei has had a significant trade surplus in the 2000s. Official statistics show Singapore, Malaysia, the U.S., and China as the leading suppliers of imports in the second quarter of 2008. The United States was the third-largest supplier of imports to Brunei in 2008.

Brunei's substantial foreign reserves are managed by the Brunei Investment Agency (BIA), an arm of the Ministry of Finance. BIA's guiding principle is to increase the real value of Brunei's foreign reserves while pursuing a diverse investment strategy, with holdings in the United States, Japan, Western Europe, and the Association of Southeast Asian Nations (ASEAN) countries.

The Brunei Government encourages more foreign investment. New enterprises that meet certain criteria can receive pioneer status, exempting profits from income tax for up to 5 years, depending on the amount of capital invested. The normal corporate income tax rate is 30%. There is no personal income tax or capital gains tax.

One of the government's priorities is to encourage the development of Brunei Malays as leaders of industry and commerce. There are no specific restrictions of foreign equity ownership, but local participation, both shared capital and management, is encouraged. Such participation helps when tendering for contracts with the government or Brunei Shell Petroleum.

Companies in Brunei must either be incorporated locally or registered as a branch of a foreign company and must be registered with the Registrar of Companies. Public companies must have a minimum of seven shareholders. Private companies must have a minimum of two but not more than 50 shareholders. At least half of the directors in a company must be residents of Brunei.

The government owns a cattle farm in Australia through which the country's beef supplies are processed. At 2,262 square miles, this ranch is larger than Brunei itself. Eggs and chickens are largely produced locally, but most of Brunei's other food needs must be imported. Agriculture, aquaculture, and fisheries are among the industrial sectors that the government has selected for highest priority in its efforts to diversify the economy.

Since 2002, the government has worked to develop Brunei as an international offshore financial center as well as a center for Islamic banking. Brunei is keen on the development of small and medium enterprises and has established a technology incubator to encourage the development of an information technology industry. Brunei has also promoted ecotourism to take advantage of the over 70% of Brunei's territory that remains primal tropical rainforest. Brunei is a participant and seeks to take a leadership role in the trilateral Heart of Borneo conservation initiative.

DEFENSE
The Sultan is both Minister of Defense and Supreme Commander of the Armed Forces (RBAF). All infantry, navy, and air combat units are made up of volunteers. There are three infantry battalions equipped with armored reconnaissance vehicles and armored personnel carriers and supported by Rapier air defense missiles and a flotilla of coastal patrol vessels armed with surface-to-surface missiles. Brunei ordered three offshore patrol vessels from the U.K. but is reportedly seeking to sell these to a third country. Brunei has ordered an unconfirmed number of smaller patrol vessels to replace its aging fleet, but the sale has not been finalized.

Brunei has a defense agreement with the United Kingdom, under which a British Armed Forces Ghurka battalion (1,500 men) is permanently stationed in Seria, near the center of Brunei's oil industry. The RBAF has joint exercises, training programs, and other military cooperation with the United Kingdom and many other countries, including the United States. The U.S. and Brunei signed a memorandum of understanding (MOU) on defense cooperation in November 1994. The two countries conduct an annual military exercise called CARAT.

FOREIGN RELATIONS
Brunei joined ASEAN on January 7, 1984--one week after resuming full independence--and gives its ASEAN membership the highest priority in its foreign relations. Brunei joined the UN in September 1984. It also is a member of the Organization of the Islamic Conference (OIC) and of the Asia-Pacific Economic Cooperation (APEC) forum. Brunei hosted the APEC Economic Leaders' Meeting in November 2000 and the ASEAN Regional Forum (ARF) in July 2002.

U.S.-BRUNEI RELATIONS
Relations between the United States and Brunei date from the 1800s. On April 6, 1845, the U.S.S. Constitution visited Brunei. The two countries concluded a Treaty of Peace, Friendship, Commerce and Navigation in 1850, which remains in force today. The United States maintained a consulate in Brunei from 1865 to 1867.

The U.S. welcomed Brunei Darussalam's full independence from the United Kingdom on January 1, 1984, and opened an Embassy in Bandar Seri Begawan on that date. Brunei opened its embassy in Washington in March 1984. Brunei's armed forces engage in joint exercises, training programs, and other military cooperation with the U.S. A memorandum of understanding on defense cooperation was signed on November 29, 1994. The Sultan visited Washington in December 2002 and visited the Pacific Command in Hawaii with Ambassador William E. Todd in November 2008.

Principal U.S. Embassy Officials
Ambassador--William (Bill) Todd
Deputy Chief of Mission--John McIntyre
Management Officer--Michael Lampel

The U.S. Embassy in Bandar Seri Begawan is located on the third and fourth floors of the Teck Guan Plaza, at the corner of Jalan Sultan and Jalan MacArthur; tel: 673-2229670; fax: 673-2225293; e-mail: usembassy_bsb@state.gov A new U.S. Embassy is under construction in the diplomatic enclave at Jalan Kebangsaan.



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