Brunei is a small, energy-rich Sultanate on the northern coast of Borneo in Southeast Asia. Brunei boasts a well-educated, largely English-speaking population, excellent infrastructure, and a government intent on attracting foreign investment and projects. In parallel with Brunei’s efforts to attract foreign investment and create an open and transparent investment regime, the country has taken steps to streamline the process for entrepreneurs and investors to establish businesses and has improved its protections for intellectual property rights (IPR).
Despite senior Bruneian leaders’ repeated calls for diversification, Brunei’s economy remains dependent on the income derived from sales of oil and gas, contributing about 60 percent to the country’s GDP. Substantial revenue from overseas investment supplements income from domestic hydrocarbon production. These two revenue streams provide a comfortable quality of life for Brunei’s population. Citizens are not required to pay taxes and have access to free education through the university level, free medical care, and subsidized housing and car fuel.
Brunei has a stable political climate and is generally sheltered from natural disasters. Brunei’s central location in Southeast Asia, with good telecommunications, numerous airline connections, business tax credits in specified sectors, and no income, sales, or export taxes, offers a welcoming climate for potential investors. Sectors offering U.S. business opportunities in Brunei include aerospace and defense, agribusiness, construction, petrochemicals, energy and mining, environmental technologies, food processing and packaging, franchising, health technologies, information and communication, Islamic finance, and services.
In 2014, Brunei began implementing sections of its Sharia Penal Code (SPC) that expanded preexisting restrictions on activities such as alcohol consumption, eating in public during the fasting hours in the month of Ramadan, and indecent behavior, with possible punishments including fines and imprisonment. The SPC functions in parallel with Brunei’s common law-based civil penal code. The government commenced full implementation of the SPC on April 3, 2019, introducing the possibility of corporal and capital punishments including, under certain evidentiary circumstances, amputation for theft and death by stoning for offenses including sodomy, adultery, and blasphemy. Government officials emphasize that sentencing to the most severe punishments is highly improbable due to the very high standard of proof required by the SPC. While the SPC does not specifically address business-related matters, potential investors should be aware that there is controversy surrounding the SPC issue. Thus far there have been no recorded incidents of U.S. citizens or U.S. investments directly affected by sharia law.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||31 of 180||https://www.transparency.org/cpi2018|
|World Bank’s Doing Business Report||2019||55 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||67 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$19||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$29,600||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
6. Financial Sector
Capital Markets and Portfolio Investment
In 2013, Brunei signed a Memorandum of Understanding (MOU) with the Securities
Commission Malaysia (SCM) to boost cooperation in the capital markets. The MOU was designed to strengthen collaboration in the development of fair and efficient capital markets in the two countries. It also provided a framework to facilitate greater cross-border capital market activities and cooperation in the areas of regulation as well as capacity building and human capital development, particularly in the area of Islamic capital markets. In March 2019, the Minister of Finance II budgeted USD 15 million of the 2019/2020 fiscal budget to help launch Brunei’s stock exchange once all preconditions for such a market are met.
Money and Banking System
Brunei has a small banking sector which includes both conventional and Islamic banking. The Monetary Authority of Brunei Darussalam (AMBD) is the sole central authority for the banking sector, in addition to being the country’s central bank. Banks in the country have high levels of liquidity, good capital adequacy ratios, and well-managed levels of non-performing loans. A handful of foreign banks have established operations in the country such as Standard Chartered and Bank of China (Hong Kong). In March 2018, HSBC officially ended its operations in Brunei, after announcing its planned departure from Brunei in late 2016. All banks are under the supervision of AMBD, which has also established a credit bureau that centralizes information on applicants’ credit worthiness.
The Brunei dollar (BND) is pegged to the Singapore dollar, and each currency is accepted in both countries.
Foreign Exchange and Remittances
In June 2013, the Financial Action Task Force (FATF) announced that Brunei is no longer subject to FATF’s monitoring process under its global Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) compliance process. Brunei’s Mutual Evaluation Report cited Brunei’s significant progress in improving its AML/CFT regime and noted that Brunei had established the legal and regulatory framework to meet its commitments in its Action Plan regarding strategic deficiencies that the FATF identified in June 2011.
Any person or company providing services for the transmission of money must be licensed by the Brunei government. Only Brunei citizens may hold remittance licenses. Local financial institutions, including banks such as Bank Islam Brunei Darussalam (BIBD) and Standard Chartered Bank provide remittance services. Remittance companies require the customer’s full name, identification number, address, and purpose of the remittance. They are also required to file suspicious transaction reports with the AMBD.
Sovereign Wealth Funds
The Brunei Investment Agency (BIA) manages Brunei’s General Reserve Fund and their external assets. Established in 1983, BIA’s assets are estimated to be USD 170 billion. BIA’s activities are not publicly disclosed and are ranked the lowest in transparency ratings by the Sovereign Wealth Fund Institute.
7. State-Owned Enterprises
Brunei’s state-owned enterprises (SOEs), managed by Darussalam Assets under the Ministry of Finance and Economy, lead key sectors of the economy including oil and gas, telecommunications, transport, and energy generation and distribution. These enterprises also receive preferential treatment when responding to government tenders. Some of the largest SOE’s include the following:
The telecommunications industry is dominated by government-linked companies Telekom Brunei (TelBru), Data Stream Technologies (DST) Communications, and Progresif Cellular. Telbru is the sole provider of fixed line telephone and internet services. DST, founded in 1995, and Progresif, which took over from failed telecom company B-Mobile in 2014 and is owned by a government investment fund, provides mobile phone and internet services. In 2019, the government announced the consolidation of all telecommunications infrastructure in Brunei under a state-owned wholesale network operator called Unified National Networks (UNN).
Royal Brunei Technical Services (RBTS), established in 1988 as a government owned corporation, is responsible for managing the acquisition of a wide range of systems and equipment and maintaining those acquired systems and equipment.
Brunei National Petroleum (PB) is the national oil company owned by the Brunei government. The company was granted all the mineral rights in eight prime onshore and offshore petroleum blocks, totaling 20,552 sq. km. Currently, the company manages contractors, including Shell, Total, and Petronas, which are exploring the onshore and deep water offshore blocks.
Royal Brunei Airlines started operations in 1974 and is the country’s national carrier. The airline flies a combination of Boeing and Airbus aircraft.
Brunei’s Ministry of Transportation and Info-Communication has made corporatization and privatization part of its Strategic Plan, 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 a number of state-owned agencies: the Postal Services Department and public transportation services. 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.
Since 1982, Brunei has enforced the Emergency (Prevention of Corruption) Act. In 1984, the Act was renamed the Prevention of Corruption Act (Chapter 131). The Anti-Corruption Bureau (ACB) was established in 1982 for the purpose of enforcing the Act. The Prevention of Corruption Act provides specific powers to the ACB for the purpose of investigating accusations of corruption. The Act authorizes ACB to investigate certain offences under other written laws, provided such offences were disclosed during the course of ACB investigation. Corrupt practices are punishable under the Prevention of Corruption Act, which also applies to Brunei citizens abroad. Brunei is a member of the International Association of Anti-Corruption Authorities.
In 2018, Brunei was ranked the 31st of 180 countries worldwide in Transparency International’s corruption perception index. The ranking is an improvement from its 2016 ranking (41st). U.S. companies do not generally identify corruption as an obstacle to conducting business in Brunei. The level and extent of reported corruption in Brunei is generally low. In 2018, however, the government charged two former judges with embezzling large sums from the court system. The Sultan has made repeated statements to the effect that corruption is unacceptable.
Apart from the Anti-Corruption Bureau, there are no international, regional, local or NGOs operating in Brunei that monitor corruption.
Brunei has signed and ratified the United Nations Convention against Corruption.
Resources to Report Corruption
Government Point of Contact:
Datin Hajah Elinda Haji C.A. Mohamed
Anti-Corruption Bureau Brunei Darussalam
Old Airport Berakas, BB 3510 Brunei Darussalam
Telephone: +673 238-3575
Fax: +673 238-3193
10. Political and Security Environment
Brunei is an absolute monarchy and has no recent history of political violence. Sultan Hassanal Bolkiah is an experienced and popular monarch who rules the country as Prime Minister while also retaining the titles of Minister of Finance and Economy, Minister of Defense, and Minister of Foreign Affairs. The country experienced an uprising in 1962, when it was a British protectorate, which ended through the intervention of British troops. The country has been ruled peacefully under emergency law ever since. Brunei has managed to avoid demands for political reform by making use of its hydrocarbon revenues to provide its citizens with generous welfares and subsidies.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
Brunei’s Department of Economic Planning and Development and IMF Coordinated Direct Investment Survey data are not available.
Table 4: Sources of Portfolio Investment
Brunei’s Department of Economic Planning and Development and IMF Coordinated Portfolio Investment Survey data are not available.
14. Contact for More Information
U.S. Embassy Commercial Section
Jalan Duta BC 4115
+637 238-4616 ext. 2232