Attitude Toward Foreign Direct Investment
Brunei has an open economy favorable to foreign trade and foreign direct investment (FDI) as it continues its economic diversification efforts away from its long reliance on oil and gas exports.
FDI is important to Brunei as it plays a key role in economic and technological development. Brunei encourages FDI in the domestic economy through various investment incentives offered by the Energy and Industry Department, Prime Minister’s Office and through activities conducted by the Ministry of Foreign and Trade and the Brunei Economic Development Board.
The 2016 World Bank Ease of Doing Business report indicated that Brunei’s ease of doing business ranking improved 21 spots to 84 out of 189 economies. The significant gain was an improvement in the “starting a business” indicator, which saw Brunei’s ranking improve to 74th spot from last year’s 179th due to the elimination of miscellaneous licensing requirements and streamlining of business registration processes. Other indicators that have increased for Brunei includes paying taxes (6th in 2016, from 30th in 2015), obtaining with construction permits (21st in 2016, from 53rd in 2015), and accessing credit (79th in 2016, from 89th in 2015). Improving Brunei’s Ease of Doing Business ranking has become a key focus for the government, and the Prime Minister’s Office (PMO) has setup a special task force (PENGGERAK) to centralize government efforts to improve its ranking.
Brunei amended its laws to make it easier and quicker for entrepreneurs to establish businesses. The Business License Act (Amendment) 2016 exempts several business activities (eateries, boarding and lodging houses or other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations including places for storing petrol and inflammable material; timber store and furniture factories; and retail shops and workshops) from needing to obtain a business license. The Miscellaneous License Act (Amendment) 2015 reduces the wait times for new business registrants to start operations, with low-risk businesses like eateries and shops able to start operations immediately.
Other Investment Policy Reviews
The World Trade Organization Secretariat prepared a Trade Policy Review of Brunei in December 2014. The review can be found at https://www.wto.org/english/tratop_e/tpr_e/s309_e.pdf.
Laws/Regulations on Foreign Direct Investment (FDI)
The basic legislation on investment includes the Investment Incentive Order 2001 and Income Tax (As Amended) Order 2001. Brunei does not have a stock exchange, but the creation of a securities market is reportedly under development. Brunei’s constitution does not specifically provide for judicial independence, but in practice the court system operates without government interference. Brunei’s legal system includes parallel systems; one based on Common Law and the other based on Islamic law.
Brunei’s national strategy, Wawasan (National Vision) 2035, emphasizes attracting FDI as an important driver of growth. The Brunei Economic Development Board (BEDB) seeks to diversify Brunei's economy and create employment opportunities for its people. The BEDB administers incentives and loans to encourage investment projects from abroad.
After Brunei’s cabinet was reshuffled in late 2015, the Industry Division at the Prime Minister’s Office is the main coordinating agency for industrial development. The Ministry of Primary Resources and Tourism is the main coordinating agency for primary sector and tourism.
All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance. Except for sole proprietorships and partnerships, foreign investors can fully own incorporated companies, foreign company branches or representative offices. Foreign direct investments by multi-national corporations may not require local partnership in setting up a subsidiary of their parent company in Brunei. However, at least one company director must be a Brunei citizen or permanent resident of Brunei.
More information on incorporation of companies can be found here:
Through its Investment Incentives Order 2001, Brunei seeks to stimulate economic development by encouraging the establishment and expansion of specified industrial and economic enterprises. Under the Investment Incentives Order 2001, the following investment incentives in the form of tax relief can be offered:
Pioneer Industries: Any limited company that has been granted a pioneer certificate will be given pioneer incentives, including exemption from the 18.5 percent corporate tax for a period ranging from five years for a fixed capital expenditure of BND 500,000 to BND 2.5 million (USD 370,000 to USD 1,852,000); eight years for an expenditure over BND 2.5 million; and 11 years for a project located in a designated high-tech industrial park, with permitted extensions; exemption from taxes on imported duties on machinery, equipment, components parts, accessories or building structures; exemption from taxes on imported raw materials not available or produced in Brunei intended as feedstock for the production of Pioneer products; and carry forward losses and allowances.
Industries that have been declared as pioneer industries and pioneer products include agribusiness (fertilizers and pesticides); agricultural, construction, building and heavy equipment (cement finishing mill, manufacture of electrical industrial machinery and apparatus, rolling mill plant, sheet metal-forming); chemicals, petrochemicals, plastics and composites (plastics and synthetic, manufacture of non-metallic mineral products, gas); consumer goods and
home furnishings (furniture, ceramic and potteries, tissue paper, toys); environmental technologies (related waste industry); food processing and packaging (slaughtering, preparing and preserving halal meat, canning, bottling and packaging); health technologies (pharmaceuticals); information and communication (manufacture of radio, television and communication equipment and apparatus); industrial equipment and supplies (glass, wood base); marine technology (ship repair and maintenance, supporting services to water transport); metal manufacturing and products (aluminum wall tile); services (aircraft catering services); textiles, apparel and sporting goods (textiles).
Pioneer Service Companies: Pioneer service companies may be eligible for tax relief, depending on the fixed capital expenditure, for a period of eight years with given extension not exceeding 11 years in total from the commencement day in relation to any qualifying activity other than financial services and for a period of five years which may be extended for further five years from commencement day in relation to financial service, exemption from income tax; certain dividends exempted from income tax and carry forward loss and allowance.
Activities that have been declared as pioneer services include: agribusiness (agriculture technology related services and activities); architecture and engineering (any engineering or technical services including laboratory, consultancy and research and development activities, development or production of any industrial design); automotive and ground transportation (operation or management of any mass rapid transit system); education (provision of education related services); finance (business, management and professional consultancy services, financial services, venture capital fund activity); health technologies (medical services); information and communication (computer-based information and other computer related services, publishing services); media and entertainment (maintaining and operating a private museum, provision of leisure and recreation related services and activities); services (services and activities related to warehousing facilities); travel (services and activities relating to the organization or management of exhibitions and conferences).
Production for Export: companies manufacturing export products or engaged in agriculture, forestry and fisheries wholly or partly for export may qualify for an export enterprise certificate which entitles them to tax relief on export profits; certain dividends may be exempted from income tax; exemption from import duties on machinery, equipment, component parts, accessories or building structures; and from import duties on raw materials.
Service for Export: Specified services may be eligible for exemption from income tax, deduction of allowance and losses and certain dividends exempted from income tax. The tax relief period of an export service company shall begin on its day of commencement and shall not exceed 11 years. Any given extension shall not exceed three years at one time and not exceed 20 years in total. Qualified services have included: architecture and engineering (technical services including construction, distribution, design and engineering services); education (educational and training service); industrial equipment and supplies (fabrication of machinery and equipment, and procurement of materials, components and equipment); information and communication (data processing, programming, computer software development, telecommunications and other related ICT services); services (consultancy, management supervisory or advisory services relating to any technical matter or to any trade or business; professional services including accounting, legal, medical and architectural services).
Foreign Loan for Product Equipment: There is a 20 percent withholding tax for interest paid to non-resident lenders. However the government may grant a tax exemption for any approved foreign loan if the loan is utilized for the purchase of production equipment. Additional information is available at http://www.bedb.com.bn/doing_incentives_foreign.html. Information on additional forms of business and investment incentives is available at http://www.bedb.com.bn/doing_incentives.html.
Limits on Foreign Control and Right to Private Ownership and Establishment
There is no restriction on total foreign ownership of companies incorporated in Brunei. The Companies Act requires locally incorporated companies to have at least one of the two directors—or if more than two directors, at least two of them—to be ordinarily resident in Brunei, but exemptions may be obtained in some circumstances. The rate of corporate income tax is the same whether the company is locally or foreign owned and managed,
All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance. Foreign investors can fully own incorporated companies, foreign company branches, or representative offices, but not sole proprietorships and partnerships. FDI from multinational corporations may not require a local partner in setting up a subsidiary in Brunei if at least one company director is a Brunei citizen or permanent resident in Brunei.
More information on incorporation of companies can be found here:
Brunei’s Ministry of Communication has made corporatization and privatization part of its Strategic Plans 2008-2017, which calls for the Ministry to shift its role from a service provider to a regulatory body with policy-setting responsibilities. In that role, the Ministry will develop specific policies through corporatization and privatization; establish a regulatory framework and business facilitation. Currently, the Ministry is studying initiatives to privatize four state-owned agencies: the Ports Department, the Maritime and Port Authority of Brunei Darussalam, the Postal Services Department, and Brunei International Airport management. These services are not yet completely privatized and there is no timeline for privatization, as the Ministry is still in the process of considering the initiative. Guidelines regarding the role of foreign investors and the bidding process are not yet available. The strategy can be found at: www.mincom.gov.bn
Screening of FDI
The Brunei Economic Development Board (BEDB), the frontline agency that promotes and facilitates foreign investment into the country, works with the Invest in Brunei Darussalam FAST (FDI Action and Support Center) under the Prime Minister’s Office to evaluate investment proposals, liaise with government agencies and obtain project approval from the government’s Foreign Direct Investment and Downstream Industry Committee.
Brunei does not have any competition legislation pertaining to the regulation of competition issues. Brunei in May 2012 formally started drafting the Brunei Competition Order, which seeks to enact prohibitions against anti-competitive agreements, abuse of dominance, and anti-competitive mergers. As of May 2016, there is no information on when the law might be approved and implemented.