Weaning Brunei off oil – The Scoop

As a resource-rich nation, Brunei Darussalam’s economic system relies upon closely on developments within the oil and gasoline sector. The Bruneian authorities have — for the previous few many years — acknowledged the significance of diversifying their economic system to construct resilience, and had deliberate because the late Nineteen Nineties to develop the principle financial drivers to non-resource sectors.

Whereas Brunei has made progress in financial diversification lately, the nation stays much less diversified than different resource-rich economies, such because the United Arab Emirates, Indonesia, and Malaysia.

ASEAN+3 Macroeconomic Analysis Workplace’s (AMRO) simply launched annual session report on Brunei says that the nation will want a strategic plan that broadens its sources of earnings past oil as a result of in line with the BP Statistical Assessment of World Power 2021, Brunei’s oil reserves will possible run out in 27 years. The nation’s earnings is derived largely from oil exports.

As a high-income economic system, Brunei’s diversification technique ought to deal with excessive value-added sectors akin to data and communications expertise and artistic industries, in addition to enterprise and monetary providers.

To determine a strategic growth plan, the nation ought to formulate coverage by way of coordinating totally different measures. For instance, fiscal expenditures and tax incentives might prioritize offering an expenditure program that helps develop sure excessive value-added industries.

The authorities may also encourage diversification by means of international direct funding incentive schemes, and arrange joint ventures to speed up infrastructure development, notably in relation to logistics to assist the export of non-oil and gasoline merchandise.

Human capital is important in selling excessive value-added industries and the providers sector. The Bruneian authorities ought to enhance the matching of expertise and training with the necessities of such diversification.

Brunei must also take a unified and strategic method towards the event of the micro, small and medium enterprise (MSME) section of the economic system. For instance, the monetary assist scheme for MSMEs might prioritize loans for these in excessive value-added sectors, and taxation insurance policies might be designed to decrease the enterprise prices of MSMEs in the identical sectors.

Lastly, we commend the authorities for his or her efforts in financial diversification up to now decade, which was partly supported by the sturdy fiscal reserves gathered from the oil and gasoline revenues.

Brunei achieved a significant milestone in financial diversification in 2020 with the institution of Hengyi Industries and its graduation of operations in late 2019.

Hengyi produces petrochemical merchandise utilizing principally imported oil, a diversification into downstream actions. The corporate’s petrochemical exports and the sharp drop in world oil costs final yr led to the non-oil and gasoline sector making up greater than 50 p.c of nominal GDP for the primary time on document (Determine 1).

The nation’s share of non-oil and gasoline exports additionally elevated considerably to 48.6 p.c in 2020 from 14.8 p.c in 2019.