1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Brunei has an open economy favorable to foreign trade and FDI as the government continues its economic diversification efforts to limit its long reliance on oil and gas exports.
FDI is important to Brunei as it plays a key role in the country’s 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 due largely to improvements in the “starting a business” indicator, which saw Brunei’s ranking improve to the 74th spot from last year’s 79th due to the elimination of miscellaneous licensing requirements and streamlining the business registration processes, mostly of which can be done online. Other indicators that have improved include paying taxes (6th in 2016, from 30th in 2015), obtaining construction permits (21st in 2016, from 53rd in 2015), and accessing credit (79th in 2016, from 89thin 2015). Improving Brunei’s Ease of Doing Business ranking has become a key focus for the government, and the Prime Minister’s Office has setup a special task force, referred to as “PENGGERAK to centralize government efforts to improve this ranking.
Brunei amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 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) of 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.
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.
Other Investment Policy Reviews
As part of Brunei’s effort to attract foreign investment, several facilitating agents were established including: the Brunei Economic Development Board (BEDB), FDI Action and Support Center (FAST), and Darussalam Enterprise (DARe). These organizations work together to smoothen the process of obtaining permits, approvals and licenses. Facilitating services are now consolidated into one government .
BEDB, the frontline agency that promotes and facilitates foreign investment into the country, works with FAST 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. DARe will then support international investments once they are in full operation.
A major share of outward investment is made by the government through its sovereign wealth funds, which are managed by the Brunei Investment Agency (BIA) under the Ministry of Finance. No data is available on the total investment amount due to a strict policy of secrecy. It is believed that the majority of sovereign wealth funds are invested in foreign portfolio investments and real estate. State-owned Brunei National Petroleum Company has also evolved into an outward foreign investor, winning tenders to explore and develop onshore blocks in Myanmar. Despite the limited availability of public information regarding the amount, the funds are generally viewed positively and managed well by BIA.