Diversification of Brunei Darussalam

1
Diversification of Brunei Darussalams
EconomyThe Challenges and Opportunities

• Prepared by
• Awang Haji Nairul Anawar bin Haji Abu Lahai
• Awang Haji Zakaria bin Haji Ahmad
• Pg. Abd Haris bin Pg. Haji Shabudin
• Lt. Col(U) Mohd. Sallehin bin Haji Mohd. Taib

2
Why Need Economic Diversification?

• To reduce dependency on oil and gas
• To create more and more jobs
• To create more resources of revenue

3
Brunei began to adopt policy on economic
diversification since early 1970

• Implementation of the Investment Incentive Act
  1975
• Formation of the Ministry of Industry and Primary
  Resources 1st January 1989
• Formation of Brunei Darussalam Economic Council
  (BDEC)and the Formation of Brunei Darussalam
  Economic Development Board (BEDB) November 2001
• Government Linked Companies

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BEHAVIOUR OF GDP, OIL NON OIL SECTORS (MILLIONS
B) AT CURRENT PRICE
YEAR GDP Value contr GDP Value contr OIL SECTOR Value contr OIL SECTOR Value contr NON OIL SECTOR NON OIL SECTOR NON OIL SECTOR NON OIL SECTOR
YEAR GDP Value contr GDP Value contr OIL SECTOR Value contr OIL SECTOR Value contr GOVT GOVT PRIVATE PRIVATE
YEAR GDP Value contr GDP Value contr OIL SECTOR Value contr OIL SECTOR Value contr Value contr Value contr
1986 5,135.6 100 3,062.6 59.6 1,110.3 21.6 962.7 18.7
1987 5,800.9 100 3,566.5 61.5 1,152.4 19.8 1,083.0 18.7
1988 5,414.8 100 2,884.1 53.3 1,317.4 24.3 1,213.3 22.4
1989 5,845.0 100 3,033.7 51.9 1,375.4 23.5 1,435.9 24.6
1990 6,508.6 100 3,490.7 53.6 1,436.6 22.1 1,581.3 24.3
1991 6,620.5 100 3,334.7 49.6 1,655.7 25.0 1,630.1 24.6
1992 6,565.1 100 2,983.5 45.4 1,754.0 26.7 1,827.6 27.8
1993 6,585.1 100 2,753.3 41.8 1,845.3 28.0 1,986.5 30.2
1994 6,686.2 100 2,541.3 38.0 1,916.6 28.7 2,228.3 33.3
1995 7,394.2 100 2,862.6 38.7 2,190.7 29.6 2,340.9 31.7
1996 7,408.6 100 2,686.3 36.3 1,905.0 25.7 2,817.3 38.0
1997 7,628.1 100 2,991.7 39.2 1,713.2 22.5 2,923.2 38.3
1998 6,534.0 100 2,139.2 32.7 1,763.9 27.0 2,630.9 40.3
1999 7,144.7 100 2,668.1 37.3 1,783.6 25.0 2,673.0 37.4
2000 7,441.1 100 2,951.1 39.7 1,803.6 24.2 2,686.4 36.1
2001 7,481.9 100 2,717.7 36.3 1,855.8 24.8 2,908.6 38.9
2002 7,651.7 100 2,836.6 37.1 1,929.8 25.2 2,885.3 37.7
2003 8,236.9 100 3,270.9 39.8 1,936.5 23.5 3,020.5 36.7
Provisional
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CONTRIBUTION GROWTH OF PRIVATE SECTOR
AND FOREIGN LABOUR FORCE
YEAR Value Of Private Sector GDP Contri bution to GDP Number of Total Workers in Private Sector Number of Foreign Workers in Private Sector F.W as Employed Labour Force In Private Sector
1986 962.7 18.7 Na Na 37.00
1987 1,083.0 18.7 Na Na Na
1988 1,213.3 22.4 Na Na Na
1989 1,435.9 24.6 Na Na Na
1990 1,581.3 24.3 Na Na Na
1991 1,630.1 24.6 54,420 39,964 73.44
1992 1,827.6 27.8 63,118 47,392 75.08
1993 1,986.5 30.2 67,990 51,801 76.19
1994 2,228.3 33.3 80,144 62,326 77.77
1995 2,340.9 31.7 75,618 60,994 80.66
1996 2,817.3 38.0 Na Na 78
1997 2,923.2 38.3 Na Na 76
1998 2,630.9 40.3 94,049 71,691 76.23
1999 2,673.0 37.4 84,499 61,784 73.12
2000 2,686.4 36.1 90,258 66,723 73.92
2001 2,908.6 38.9 98,372 71,844 73.03
2002 2,885.3 37.7 Na Na Na
2003 3,020.5 36.7 Na Na Na
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• Achievement and performance of economic
  diversification
• is not very encouraging so far.
• According to the latest official figures, the
  oil and gas
• industries accounts for 90 of the total
  exports, 88 of
• government revenue and 40 of GDP.
• Unemployment rate is increasing, currently 8,600
  were
• unemployed (10.98). The rate was only 3.6
  in 1981
• and 7 in 1992.
• Current population 340,800 and more than 101,900
  is
• under 14.
• Current estimates are that oil will last around
  15 years at
• current production level and gas a further 30.

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• Our group had looked into the performance of the
• various sectors
• fishing industry
• tourism industry
• the industry under Brunei Industrial
• Development Authority (BINA)
• Direction towards privatization

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• Fishing Industry
• There are three important areas in fishing
  industry.
• Marine
• Aquaculture
• Food processing
• Brunei fisheries potentials are estimated to be
  worth
• at least B200 million a year since the last
  few years.
• However, every year the industry has not
  generated
• even 50 of the estimated value.

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ECONOMIC ACTIVITY BY SECTORS (MILLIONS B) AT
CURRENT PRICE
YEAR Agriculture Agriculture Forestry Forestry Fishery Fishery
Value Contri Value Contri Value Contri
1986 70.8 1.4 16.3 0.3 11.8 0.2
1987 80.2 1.4 18.1 0.3 14.0 0.2
1988 90.9 1.7 13.2 0.2 16.4 0.3
1989 103.1 1.8 21.9 0.4 19.4 0.3
1990 116.8 1.8 14.0 0.2 22.9 0.4
1991 119.1 1.8 15.0 0.2 25.7 0.4
1992 121.7 1.9 16.0 0.2 28.0 0.4
1993 124.7 1.9 17.0 0.3 31.9 0.5
1994 128.2 1.9 18.3 0.3 33.2 0.5
1995 132.0 1.9 20.1 0.3 35.7 0.5
1996 141.5 1.9 22.3 0.3 37.2 0.5
1997 153.2 2.0 24.8 0.3 40.3 0.5
1998 139.2 2.1 20.8 0.3 41.0 0.6
1999 138.3 1.9 19.1 0.3 39.1 0.5
2000 140.7 1.9 20.2 0.3 41.3 0.6
2001 159.6 2.1 23.3 0.3 57.5 0.8
2002 156.7 2.0 26.3 0.3 80.8 1.1
2003 180.7 2.2 26.2 0.3 87.6 1.1
Provisional
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There are several hindrances that cause to the
failure in meeting the production target. A.
Delayed of fishery development programmes which
were caused by the following- I. Prioritizing
conflicts on the development programmes with
other government agencies as for location is
concerned. II. Rigid rules in using the budget
allocated and not responding well to the
current requirement and development. III.Conf
licts in prioritizing the development programmes
by the developer such as the Public Work
Department.
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B. Lack of ability and commitment of private
sectors in improving the production because
of the following- I. Lack of expertise in
terms of technical, management, financial of
the local entrepreneurs to implement the
projects within the time frames. II. Lacking
experience and expertise in marketing the fish
products.
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C. Investment and participation in the industry
is very low. Its arises because of- I.
The negative view towards fishing industry with
the perception of high risks. Therefore, less
interest and investment of local financial
institute. II. Lack of participation and
coordination given by other government
agencies such as the licensing, permit and so
forth.
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D. Highly competitive from new and emerging
economies such as China, which produces a
huge amount of fish and prawn. Obviously it
gives stiff competitiveness- I. In terms of
prices. II. In terms of markets.
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ARRIVALS BY PURPOSE OF ENTRY TO BRUNEI FROM
1988-2000
YEAR TOTAL RETURNING RESIDENTS INTENDING RESIDENTS VISITORS VISITORS VISITORS VISITORS VISITORS VISITORS
YEAR TOTAL RETURNING RESIDENTS INTENDING RESIDENTS TOTAL TOURIST BUSINESS RELATIVES TRANSIT OTHERS
1988 926,023 451,703 16,910 457,410 9,017 38,612 41,891 33,111 334,779
1989 946,377 539,205 14,421 392,751 8,549 43,882 38,531 21,837 279,952
1990 931,176 541,001 13,539 376,636 8,010 43,849 36,261 24,026 264,490
1991 931,234 555,978 31,312 343,944 28,640 64,151 133,552 39,625 77,976
1992 1,154,992 696,913 48,203 411,876 38,035 79,023 159,867 38,522 96,429
1993 1,278,854 732,229 57,716 488,909 44,921 85,225 181,794 40,754 136,215
1994 1,652,883 955,138 75,391 622,354 58,090 93,670 224,140 53,402 193,052
1995 1,664,088 874,878 (1) - 789,210 36,751 48,602 230,436 25,398 448,023
1996 1,675,294 814,393 (1) - 860,901 55,497 43,691 250,139 20,782 490,792
1997 1,748,841 891,221 (1) - 857,620 32,933 27,480 240,731 43,819 512,657
1998 2,121,612 811,119 (1) - 1,310,493 32,738 34,372 228,684 66,361 948,338
1999 1,997,227 697,211 (1) - 1,300,016 38,440 29,997 247,034 75,756 908,788
2000 2,118,250 811,486 (1) - 1,306,764 41,241 27,303 258,836 75,381 904,003
Source Immigration and National
Registration Department, Ministry of Home Affairs
Note (1) Including intending resident
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ECONOMIC ACTIVITY BY SECTORS (MILLIONS B) AT
CURRENT PRICE
YEAR Construction Construction Wholesale Wholesale Retail Retail Restaurant and Hotel Restaurant and Hotel Transport, Storage Communication Transport, Storage Communication
YEAR Value Contri bution Value Contri bution Value Contri bution Value Contri bution Value Contri bution
1986 170.1 3.3 71.3 1.4 155.5 3.0 40.1 0.8 123.2 2.4
1987 183.1 3.2 90.1 1.6 179.7 3.1 45.9 0.8 150.4 2.6
1988 195.7 3.6 91.9 1.7 207.6 3.8 52.1 1.0 170.8 3.2
1989 254.6 4.4 116.2 2.0 239.8 4.1 59.4 1.0 196.4 3.4
1990 277.4 4.3 122.0 1.9 257.3 4.0 67.7 1.0 214.1 3.3
1991 302.8 4.6 128.0 1.9 272.8 4.1 72.5 1.1 235.2 3.6
1992 315.8 4.8 136.6 2.1 285.4 4.3 77.9 1.2 252.0 3.8
1993 334.0 5.1 142.4 2.2 295.6 4.5 85.8 1.3 264.9 4.0
1994 364.4 5.5 152.6 2.3 307.2 4.6 96.1 1.4 278.3 4.2
1995 404.7 5.5 162.6 2.2 324.7 4.4 108.0 1.5 298.5 4.0
1996 487.2 6.6 171.9 2.3 399.0 5.4 127.8 1.7 304.6 4.1
1997 523.4 6.9 152.7 2.4 405.7 5.3 135.3 1.8 347.0 4.5
1998 539.2 7.7 192.6 2.7 418.7 6.0 148.4 2.1 372.5 5.3
1999 442.5 6.2 203.2 2.8 332.0 4.6 144.9 2.0 382.7 5.4
2000 428.2 5.8 205.6 2.8 320.3 4.3 148.6 2.0 413.5 5.6
2001 428.8 5.7 201.9 2.7 339.5 4.5 141.2 1.9 396.8 5.3
2002 408.8 5.3 221.0 2.9 425.6 5.6 155.1 2.0 368.8 4.8
2003 334.0 4.1 231.9 2.8 407.5 4.9 164.3 2.0 431.9 5.2
Provisional
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Tourism Industry The problem frequently
encountered in development of tourism industry
are I. Uncoordinated effort in the
implementation of tourism and
hospitality. II. Lack of places of interest
including public facilities. III. Ineffective
promotion. IV. Lack of activities for tourists
in the country, and V. Stiff competition from
the neighboring countries.
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NUMBER OF NEW COMPANIES ALLOCATED AT
THE INDUSTRIAL SITES IN BRUNEI FROM 1989-2004
SITES YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 TOT
Beribi I II 23 0 5 5 4 6 3 1 2 1 1 0 0 1 0 1 53
Lambak Kanan Barat 0 1 5 11 3 5 5 12 1 1 1 2 1 0 3 1 52
Lambak Kanan Timor 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 2
Salar 0 0 0 2 1 22 2 9 8 1 2 1 0 0 4 1 53
Serasa 3 0 0 2 3 6 5 6 6 1 1 0 0 0 1 1 35
Serambangun 0 0 0 4 1 0 2 3 1 3 0 0 0 0 1 15
Pekan Belait 0 0 7 2 1 3 0 1 3 1 0 0 2 0 1 1 22
Sungai Bera 0 0 0 0 1 0 6 3 0 0 1 1 1 1 1 21
Batu Apoi 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1
TOTAL 26 1 17 26 14 42 18 38 25 8 12 4 4 3 11 5 254
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STATUS OF PROJECTS ALLOCATION AT THE INDUSTRIAL
SITES IN BRUNEI BY 2004
Industrial Sites Approved Projects Operated Projects Projects going to Operate Pull Out Projects
Beribi I II 53 40 2 11
Lambak Kanan Barat 2 23 2 27
Lambak Kanan Timor 2 0 2 0
Salar 53 22 5 26
Serasa 35 18 3 14
Serambangun 15 4 1 10
Pekan Belait 22 12 3 7
Sungai Bera 21 5 7 9
Batu Apoi 1 0 1 0
TOTAL 254 124 27 104
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EMPLOYMENT OPPORTUNITIES (INTENDED) AT
THE INDUSTRIAL SITES IN BRUNEI FROM 1989-2004
YEAR TOTAL EMPLOYMENT OPPORTUNITIES ACCUMULATED EMPLOYMENT OPPORTUNITIES
1989 1,500 1,500
1990 5 1,505
1991 526 2,031
1992 1,541 3,572
1993 1,285 4,857
1994 2,092 6,949
1995 840 7,789
1996 7,284 15,073
1997 1,252 16,325
1998 240 16,565
1999 1,328 17,893
2000 198 18,091
2001 100 18,191
2002 607 18,798
2003 446 19,244
2004 157 19,401
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TOTAL EXPORTS OF BRUNEIS GARMENTS INDUSTRY FROM
1989-2003
YEAR QTY (DOZ) TOTAL (US) TOTAL (B)
1989 179,936 5,377,741 10,255,352
1990 261,806 9,685,409 17,360,126
1991 406,764 18,942,925 31,085,340
1992 464,925 19,214,187 31,319,126
1993 569,238 23,309,781 39,138,748
1994 789,605 28,809,553 40,659,772
1995 969,472 41,514,308 58,535,174
1996 1,022,917 46,753,607 65,455,049
1997 1,230,730 57,528,747 81,690,821
1998 1,799,275 87,131,535 139,409,976
1999 2,978,711 142,206,915 238,907,617
2000 4,412,190 207,731,257 348,988,512
2001 5,017,429 224,978,312 377,963,564
2002 5,237,823 216,188,061 366,330,669
2003 5,814,213 229,272,598 388,502,413
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• The Industry under BINA
• The problem encountered in developing the
  industry
• under BINA.
• Small local market
• Lack capability of entrepreneurs to be
  competitive in the
• international markets.
• High operation cost
• Unattractive policy (e.g Land policy)

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• The Direction towards Privatization
• The problem encountered to privatization
• slowness in decision making
• slowness in implementing projects

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• In general to speed up the economic
  diversification the
• Government has to play a vital role as follows
• I. Provide the necessary physical
  infrastructure
• II. Formulate a policy to facilitate and create
  a conducive
• business such as tax, land policy and so
  forth.
• III. Change the mindsets, attitudes, perception,
  knowledge
• and skills of the individual stakeholders
  either the
• public sectors, private sectors and the
  community on the
• importance and urgency of economic
  diversification.
• Such for example in the administrative
  efficiency viz
• faster in decision making, faster in
  implementation of
• infrastructural projects and so forth.

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IV. All the ministries and department should
coordinate the activities to ensure more
efficient and effective implementation of
the economic diversification policy. V. Focus
and align any viable sector which Brunei got the
competitive advantage. VI. Brunei has got
to be proactive and react very fast to the
international changes. VII. Able to compete
regionally and internationally.
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• BEDB to develop Pulau Muara Besar into
• a Global Mega Port and Sungai Liang
• Industrial Park.
• This is in line with the objective of BEDB
• to create 6,000 new permanent jobs and
• attract US4.5 billion in investments by
• 2008.

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• What is our opportunities?
• What will happen to us if Brunei cannot
• diversify its economy successfully the
• next 15 years?