Brunei Economy Facts
Brunei is a rich country thanks to large resources of oil and natural gas. Revenues from oil and gas extraction dominate the entire economy. They have also enabled the Sultan to build a welfare state with low taxes and generous government grants.
Ninety percent of Brunei’s export income comes from gas and oil production, which also accounts for 80 percent of the state’s revenue. It contributes just over half of the country’s GDP, while only a few percent of the workforce is found in the oil and gas sector.
- Countryaah.com: Major imports by Brunei, covering a full list of top products imported by the country and trade value for each product category.
The oil industry is dominated by the company Brunei Shell Petroleum, which is jointly owned by the state and the oil company Shell. The natural gas is processed and exported in collaboration with Japanese companies. It is exported in liquid form (LNG) to Japan and South Korea. Parts of the profits abroad are invested through the government agency Brunei Investment Agency (BIA).
Looking for new sources of income
The oil money has meant that other industries have remained poorly developed, despite the government trying to get away from the dependence on oil and natural gas since the 1980s. In order to broaden the country’s economic base, in 2001 the department BEDB (Brunei Economic Development Board) was established for business development.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including BRN which represents the country of Brunei. Check findjobdescriptions to learn more about Brunei.
Fish processing is an industry that has grown relatively much. Extraction of silica sand for glass production has begun, as has methanol production from natural gas. The government markets Brunei as a financial and business center, a hub for transport and logistics as well as a destination for ecotourism.
The Muslim Brunei is also investing in offering halal-labeled goods (that is, Muslim approved goods). Traditionally, halal is about food, but there are also medicines and cosmetics that are halal-labeled.
The government is trying to attract foreign companies to Brunei with low taxes during the establishment period. Some companies can be completely exempt from tax if they are deemed to have “pioneer status”. Both the financial operations, including foreign banks and companies, and tourism have increased since the turn of the millennium, but there is no economic sector that, in the foreseeable future, looks to be able to replace oil and gas revenues. Since 2009 there has been a “sustainability fund” to safeguard Brunei’s finances in the long term.
Sultan family costs
Sultan Hassanal Bolkiah is usually referred to as one of the world’s richest men, but few know what really belongs to him personally and what belongs to the state. On the state’s expenditure side, there are several large fuzzy items with “other expenses”, and it is unclear how much of the state budget goes to the sultan family’s luxury life. The only budgetary control that takes place is that Parliament is allowed to listen when the government presents the year’s budget and then approves it.
Despite large imports of machinery, vehicles and food, in particular, Brunei has a substantial surplus in the trade balance with foreign countries, thanks to the export of oil and natural gas. In addition, clothing is the only significant export product.
Brunei and other Asian countries have entered into free trade agreements with China. The country also has a bilateral free trade agreement Japan. Brunei was included when twelve countries around the Pacific signed the Free Trade Agreement TPP (Trans-Pacific Partnership) in 2016. One purpose of the agreement was to counterbalance China’s dominance in Asia. In its original form, the TPP would have covered 40 percent of the world economy, but it failed before it came into force when the United States withdrew after President Trump took office.
The remaining eleven countries, which together account for about 14 percent of the world economy, decided to stick to the agreement. After some adjustments, they signed in March 2018 under the TPP-11, or CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Parthership), which includes economic heavyweights such as Japan, Canada and Australia.