16 May 2016
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. Brunei gained its independence from the UK in 1984. Its economy is heavily resource-dependent, with the oil and gas sector accounting for about 60% of GDP and more than 90% of its export and fiscal receipts. While Brunei has the smallest population in ASEAN, its oil and gas resources have generated a high per-capita income – the second highest in ASEAN after Singapore. Moreover, there is no personal income tax and no capital gains tax.
- Brunei’s major exports are crude oil and liquefied natural gas (LNG), with Japan, Korea, India and Australia being its major markets. Manufactured goods, machinery and transport equipment are the main imports sourced from Malaysia and Singapore, its ASEAN neighbours, as well as from China and Japan. The sharp fall in oil and gas prices in 2015 substantially hit Brunei’s current account balance and government revenue, with the Brunei government expected to struggle with widening fiscal deficit in 2016.
- Although heavily reliant on its oil and gas, Brunei has attempted to diversify its economy. The government sets out policy goal of developing ICT as a new economic driver for the country. However, the IMF noted that the country needs to better prioritise fiscal spending, implement reforms and boost private sector growth, as well as continue progress on institutional capacity building.
- Aside from being a member of ASEAN, with the establishment of the ASEAN Economic Community (AEC) in December 2015, Brunei has signed a free trade agreement (FTA) with Japan. As one of the 12 signatories to the Trans-Pacific Partnership (TPP) agreement, Brunei aims to ratify the TPP in two years. Labour reforms including introduction of minimum wage and labour union are expected under the TPP. Besides, Brunei is a member of the Regional Comprehensive Economic Partnership (RCEP), the negotiation of which is expected to be concluded in 2016.
- Chinese investment in Brunei is also increasing. In 2011, China's largest private chemical-fibre supplier revealed plans to build a petrochemical plant in Brunei with a total investment of US$6 billion). In 2014 China and Brunei signed an agreement to set up an economic corridor aimed at creating more than 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.
- Brunei Economic Development Board (BEDB) promotes inward FDI and provides tax incentives for industries including aircraft catering services, textiles, and the manufacturing of electronic products and communication equipment. Information on the investment guides and incentives in Brunei is available on the BEDB website.
- Brunei’s cumulative FDI was US$6.22 billion as at end-2014 compared with US$14.21 billion as at end-2013. Based on statistics from China’s Ministry of Commerce, Chinese cumulative FDI in Brunei was valued at US$69.6 million as at end-2014.
- 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.