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Brunei in 2013 Paradoxes in Image and Performance? 02 Christopher.indd 83 4/29/14 5:24:42 PM Southeast Asian Affairs 2014 BRUNEI IN 2013 Paradoxes in Image and Performance? Christopher Roberts Brunei is currently a politically stable and peaceful country that enjoys one of the highest per capita incomes in Asia due to an abundance of hydrocarbon reserves. However, it is the smallest Southeast Asian nation in terms of its population (415,717) and second smallest in terms of its land mass (5,765 square kilometres). This, together with its long term existence as a constitutional sultanate or Malay Islamic Monarchy (Melayu Islam Beraja), provides for a fascinating mix of historical, cultural, and political considerations. However, its size, strategic location, and the challenges of modernization and globalization continue to generate a conundrum over the most viable policy approaches to economic, social, and security issues in the long term. Given these considerations, this chapter provides an overview of a broad spectrum of key developments in economic, political, and foreign affairs during 2013. As detailed below, Brunei faced a mixed year where there was a general stasis on the economic front and a new level of conservatism politically, but a successful mix of international diplomacy and leadership vis-à-vis Southeast Asian regionalism. Economic Affairs The pace of economic development in Brunei Darussalam has been quite mediocre in recent years. At the time of writing, Brunei was estimated to have achieved only 1.4 per cent real GDP growth during 2013 and this follows from 0.9 per cent in 2012.1 While real GDP growth is predicted to accelerate to 2.1 per cent CHRISTOPHER ROBERTS is Senior Lecturer in Asian Politics and Security, Research Convenor, National Security College at the Australian National University. 02 Christopher.indd 85 4/29/14 5:24:43 PM 86 Christopher Roberts in 2014 and 2.5 per cent in 2015, such growth falls far short of the official target of 6 per cent that is declared in the country’s Vision/Wawasan 2035.2 This relatively lacklustre performance is primarily a consequence of continued dependence on the export of hydrocarbons and an associated lack of capacity to diversify the economy away from such dependence despite numerous decrees and directives to the contrary by Sultan Haji Hassanal Bolkiah. Nonetheless, the hydrocarbon revenue remains sufficient to maintain significant trade and budget surpluses; a state-of-affairs that is reinforced by the long-term channelling of its oil wealth into significant investments abroad.3 The economic climate was also reinforced by continued low inflation (estimated at 0.8 per cent in 2013), an outcome that is a consequence of the currency peg to the Singapore dollar and the government’s continued subsidization of certain basic items like rice and sugar. Despite the continued dependence of the country on hydrocarbon revenue (approximately 90 per cent of GDP),4 there have been some successes in the Sultanate’s attempts to diversify its economy. Noteworthy examples include the commencement of construction for the Pulau Muara Besar port, the construction of a new ammonia plant (scheduled to come online in 2014), and the completion of a methanol plant in mid-2010. However, the methanol plant suffered from an “unexpected shutdown” for a week in February and was then taken offline for “maintenance” from May 2013 through to January 2014. A smaller development concerned a joint investment between Aureos (Brunei) and Viva Pharmaceutical (Canada) to construct Brunei’s first Pharmaceutical manufacturing plant that is estimated to generate a further 250 local positions.5 Given that Brunei only has a few thousand unemployed workers, such projects will have a significant impact in this sphere. However, the extent to which the country has a current need to extend its number of employment opportunities is debatable as it is already heavily dependent on foreign labour. The government is also targeting tourism as a further source of income and employment and has declared an intention to increase tourist arrivals from 242,000 in 2011 to 400,000 by 2016.6 Here, there is room to further develop eco-tourism in the largely untouched tropical rainforest areas of the Temburong District. The government will support tourism and other industries through the enlargement of Brunei’s international airport (scheduled for completion by November 2014) and a July 2013 announcement that it will be launching a new low-cost airline in 2014.7 For several years the Sultanate has also sought to develop the information and communications technology sector and has subsequently invested US$190 million to install a high-speed optic fibre broadband network 02 Christopher.indd 86 4/29/14 5:24:43 PM Brunei in 2013: Paradoxes in Image and Performance? 87 to the homes of 85 per cent of the population by 2017.8 Another positive development for the sector was the May 2013 removal of Brunei from the US watch list of countries that had problems concerning the protection of intellectual property rights.9 The government has also made strong investments in the development of the agriculture, fisheries, and agro-processing sectors but there have been mixed results to date and a strong dependence on related imports continues. Meanwhile, some significant developments and investments occurred that will act to keep the hydrocarbon industry at the forefront of the economy for at least the next decade. In February 2013, Hengyi industries secured regulatory approval from China to construct a US$4.32 billion petrochemical refinery plant. The first phase of the project is expected to generate 800 positions and it is claimed that it will generate US$2 billion per annum for the economy once it is operational.10 Then, in December 2013, the hydrocarbon company Petronas announced a major gas discovery in block CA2 which is in an area subject to a 2010 production sharing agreement between Brunei and Malaysia.11 Dependence on the hydrocarbon sector is also reinforced by the number of Bruneians it employs and the subsequent regulation of the sector so that seven out of ten people employed in high positions in the sector are now Bruneian.12 Despite some discussions concerning the possibility of diversifying through greater reliance on solar energy,13 Brunei fell thirty-three places in an index that benchmarks and ranks progress by economies transitioning to a new energy system.14 While Brunei has been ranked by the World Bank as one of the best places for paying taxes,15 it also struggled in an OECD report concerning the level of tax transparency where it was assessed to have failed to put in place five of the nine criteria that, if addressed, would enable it to progress to the second phase of assessment.16 More positive was the 2013 Ease of Doing Business Report where Brunei increased its rank by twenty positions to 59th out of 189 countries. The Sultanate also improved its position in terms of the “Corruption Perceptions Index” where it climbed eight places to the 38th least corrupt in the world. Nonetheless, as the small size of the Brunei economy remains a deterrent for many investors, increased subregional integration and regional connectivity will be critically important in determining the success of future economic diversification. Here, an October agreement was reached to open new air, shipping and transportation routes between the countries of the Brunei, Indonesia, Malaysia, Philippines-East ASEAN Growth Area.17 02 Christopher.indd 87 4/29/14 5:24:43 PM 88 Christopher Roberts Political and Domestic Affairs The Sultan is well aware that a failure to successfully implement his multi- decade plans for economic diversification will have long term implications. Consequently, during the second half of 2013 he renewed his focus on the performance of the civil service. During a speech at the annual civil service day celebrations, he reminded his audience that “we are responsible in ensuring that every government project and program runs as scheduled. For all these, we continue to be committed to various investments for the desired human capacity building. The development of capacity is not solely in the form of skills and expertise but also complementary for the development and interest of the nation.” For some years the sultan has expressed his discontent about the pace of economic diversification and the extent to which his decrees (royal titahs) have been implemented. In terms of the image of the civil service amongst the public, he also highlighted that “it is the responsibility of the civil service to know that any services that fail to meet the public needs should be improved immediately” and he also complained that he and the public did not know the full extent of the implementation of a project to install broadband internet to 85 per cent of the country’s homes by 2017.18 Despite some early signals by the Sultan concerning democratic reforms, nothing of significance has occurred since the appointment of the first female members to the Legislative Council in 2011, and 2013 was no exception. The pressure to move towards democracy has, in part, been reduced by more positive assessments concerning the amount of hydrocarbon reserves. While earlier assessments had indicated that there was as little as twenty years’ worth of reserves, more recent assessments suggest a significantly extended shelf-life due to recent discoveries and expected future deep sea discoveries as well as a production cap on the annual level of gas and oil extraction.19 Assessments about the continued threat of terrorism also serve to justify the continuation of the Sultan’s rule and, in this vein, the Sultanate strengthened its anti-terrorism laws during the year.20 Further, the Sultan has sought to counter any potential deficits in regime legitimacy by imposing a new level of religious conservatism into the formal judicial system.
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