1 Sept 2017
Brunei: Market Profile
Major Economic Indicators
- Brunei is located on the north coast of the island of Borneo, facing the South China Sea and surrounded by East Malaysia. It gained independence from the UK in 1984. Its economy is heavily resource-dependent, with the oil and gas sector accounting for some 60% of GDP and more than 90% of its export and fiscal receipts. Despite having the smallest population in ASEAN, Brunei’s per-capita income is the second highest in ASEAN after Singapore. The country levies no tax on either personal income or capital gain.
- Brunei’s major exports are crude oil and liquefied natural gas (LNG), with Japan, Korea, India, Australia and Indonesia being its major markets. Manufactured goods, machinery and transport equipment are the main imports, sourced from ASEAN neighbours Malaysia and Singapore, as well as from China, the US and Korea. The sharp fall in oil and gas prices since 2015 has substantially hit Brunei’s current account balance and fiscal revenue, prolonging the economic recession.
- The Brunei government weathered the oil price shock by tapping its foreign exchange reserves and assets. The economy will gradually improve in 2017, with the GDP contraction expected to narrow from that in 2016. In an attempt to diversify the economy to foster long-run economic stability, the government is promoting tourism, Islamic banking and manufacturing as outlined in Vision Brunei 2035. However, diversification efforts are thwarted by poor investment interests and a small private sector. The implementation of Shariah law since 2014 has restricted doing business in Brunei (such as business hours and holidays).
- Aside from being a member of the ASEAN Economic Community (AEC), Brunei has had free trade agreements (FTAs) with Japan, China, Korea and India. Brunei also participates in the ASEAN-Australia-New Zealand FTA, as well as the negotiation of the Regional Comprehensive Economic Partnership (RCEP), which is expected to be concluded in 2017.
- Chinese investment in Brunei has increased. In 2014 China and Brunei signed a deal to set up an economic corridor aimed at creating some US$500 million of trade and investment in agriculture and food production. The Bank of China was granted approval to open its first branch in Brunei in April 2016. In February 2017, a Chinese-Brunei joint venture started managing the Muara Container Port, the country’s largest container terminal. Besides, China's largest private chemical-fibre supplier is building a petrochemical plant in Brunei with a total investment of US$4 billion, with operations expected in 2019.
- Brunei Economic Development Board (BEDB) promotes inward FDI and provides tax incentives for investment, with Halal, technology and creative industry, business services, tourism and downstream oil and gas as the priority areas. Information on the investment guides and incentives in Brunei is available on the BEDB website.
- Brunei’s cumulative FDI was US$5.7 billion as at end-2016, down from US$6.1 billion as at end-2015. Based on statistics from China’s Ministry of Commerce, Chinese cumulative FDI in Brunei was valued at US$73.5 million as at end-2015.
- Hong Kong and Brunei signed a double taxation agreement in 2010.
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.