WT/TPR/S/84 Trade Policy Review Page 16

II. TRADE AND INVESTMENT POLICY REGIME

(1) GENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK

(i) Introduction

1. 's present Constitution is based on the original Constitution drawn up in 1959 and amendments made between 1971 and 1984; in 1984, Brunei resumed full political independence and took over responsibility for its own defence and foreign relations from the . The Constitution provides for the Sultan of Brunei as the , with full executive authority. Under the Constitution, the Sultan is assisted and advised by five councils, including the Council of Ministers or the Cabinet, and the Legislative Council, although, in practice, the Legislative Council has been suspended (in accordance with the Constitution) since 1984.1 As a consequence, the power to promulgate new laws is currently vested solely in the Sultan; all new laws are now made under the provision of Section 83(3) of the Constitution as "Orders".

(ii) The Executive

2. Executive authority rests with the Sultan of Brunei assisted and advised by five councils: the Religious Council, the Privy Council, the Council of Ministers, the Legislative Council, and the Council of Succession.

3. The Religious Council, at present consisting of 17 members, provides advice on matters relating to Islam; the Privy Council, which has 34 members, advises the Sultan on any amendment or revocation of any constitutional provisions, the Sultan's power to grant mercy, and the award of honours; the Council of Succession determines succession to the throne, in the event that this is required; the Legislative Council was dissolved in 1984 (section (iii) below).

4. The Council of Ministers, or Cabinet, consists of the Prime Minister and the Ministers, all of whom are appointed by the Sultan. The term of office held by Cabinet members is determined by the Sultan. At present, there are eight ministers; the Prime Minister's post is held by the Sultan.2 Provision is also made in the Constitution for the Sultan to appoint Deputy Ministers, the Attorney General, and the Auditor General. There are seven Deputy Ministers at present.

(iii) Legislative process

5. The section of the Constitution dealing with the formation of the Legislative Council was suspended in 1984.3 The Council, which under the Constitution consists of six ex-officio, five official, and ten nominated members, was dissolved.4 In the absence of the Legislative Council, the Sultan promulgates laws. As the section in the Constitution dealing with legislative procedures was suspended in 1984, new legislation in Brunei Darussalam, called "Emergency Orders" rather than "Acts", are drafted by the relevant government ministries in cooperation with the Attorney General's Chambers or directly by the Attorney General's Chambers, if instructed to do so. The draft

1 The appointment and functions of the Council of Ministers is described under Part V of the Constitution of Brunei Darussalam; Parts VI and VII of the Constitution, dealing with the Legislative Council and Legislative Procedures, were suspended in 1984. All other provisions of the Constitution continue to apply. 2 In addition, the Sultan currently holds the Finance and Defence portfolios. 3 Parts VI and VII of the Constitution were temporarily suspended in 1984. 4 Government of Brunei Darussalam (undated a). The six ex-officio members were to include the Prime Minister, the Attorney General and the Religious Adviser. Both official and nominated members were to be appointed by the Sultan. Brunei Darussalam WT/TPR/S/84 Page 17

legislation, or Order, is then presented to the Sultan by the relevant ministry or agency for signature. All new "Emergency Orders" must be consented to (signed and approved) by the Sultan in order to have the force of law. In some cases, where the principle legislation enables this, individual ministers may sign new subsidiary legislation. Upon the Sultan's consent, all Bills become law and must be gazetted, although there is no minimum time-period within which laws have to be gazetted.

6. Laws in Brunei consist of Acts, followed by "Regulations", which are subsidiary laws enacted subsequently. Laws passed after 1984, as mentioned, are called Emergency Orders or Orders. Emergency Orders carry the force of law and do not lapse unless incorporated into the laws of Brunei as "Acts" by the power of the Attorney General under the Brunei Law Revision Act.

(iv) The Judiciary

7. The highest judicial authority in Brunei is the Sultan.5 He appoints all of the judges in the courts.

8. Brunei's legal system is based mainly on English common law. The highest court in Brunei is the Supreme Court, which comprises the High Court and the Court of Appeals. The Subordinate Court consists of the magistrates courts. Appeals resulting from decisions taken by the magistrates courts are examined by the High Court, which forms a court of first instance for criminal and civil cases. For appeals relating to decisions on civil cases taken by the High Court the final court of appeal is the Court of Appeals, unless all the parties to the case agree before the commencement of any civil proceedings that the final court of appeal would be the Judicial Committee of the Privy Council, based in London.6 The High Court may not overrule any provisions of the Constitution of Brunei Darussalam, but can deal with issues relating to the Constitution insofar as interpreting them.

9. A separate (Islamic Law) Court exists for matters relating to religious disputes. There is no proper appellate process as such; according to the authorities, at present, all appeals are heard by the Judicial Committee, which rarely sits in practice. The new Syariah Courts Act (Cap. 184) provides for a court hierarchy and appellate process similar to that for civil cases; the proposed date for enforcement of this Act is 25 March 2001.

10. WTO-related issues may be raised in a domestic court of law between private parties, if the relevant WTO Agreements have been incorporated in national law through enabling legislation; however, the State of Brunei Darussalam cannot be brought before the domestic courts on cases relating to the WTO Agreements.

(2) DEVELOPMENT AND ADMINISTRATION OF TRADE POLICY

(i) Policy formulation and implementation

11. Responsibility for trade policy formulation and implementation rests with the Ministry of Industry and Primary Resources in cooperation with other government agencies, including the Ministries of Finance, Development, and Communications (Table II.1). In this regard, the authorities also consult with the private sector.

5 Under section 9 of the Constitution, the prerogative of majesty is vested in the Sultan. 6 Government of Brunei Darussalam (undated b). WT/TPR/S/84 Trade Policy Review Page 18

Table II.1 Ministerial/Departmental responsibility for trade-related issues Ministry/Agency Competence Prime Minister's Office Petroleum Unit Petroleum policy, pricing, and exploration contracts Attorney General's Chambers Registry for Company's Act and Business Names Act Intellectual property rights policy issues; registry of trade marks and patents; enforcement of all IPR laws except copyright Ministry of Industry and Primary Resources Department of Agriculture Agriculture policy and incentives; sanitary and phytosanitary standards Department of Forestry Forestry policy and incentives Department of Fisheries Fisheries policy and incentives; sanitary and phytosanitary standards Brunei Industrial Development Authority Industrial development; management of industrial sites; investment (BINA) promotion and approval; training Economic Development Board Foreign investment approvals Investment Services Section Investment incentives; administers the Brunei Economic Development Board Act, the Miscellaneous Licences Act; Secretariat for the Projects Implementation and Technical Committees for investment approval Tourism Development and Promotion Division Tourism regulation and development Ministry of Development Infrastructure development; standards and conformance; housing development; land management Ministry of Finance Royal Customs and Excise Customs tariff; valuation; rules of origin; duty drawback Treasury State budget; taxes Outward foreign investment Economic Planning and Development Economic planning; formulation of five-year national development plans The Department of Information Technology and Government procurement and procurement of food products such as salt, State Store sugar, and rice Financial Institutions Division Insurance and banking supervision Ministry of Communications Department of Civil Aviation Air transport regulation Land Transport Department Land transport regulation Marine Department Maritime transport regulation; and maritime safety Ports Department Management of shipping and Muara Port and management of Muara export zone Jabatan Telekom Brunei Telecommunications services regulation and provision of local and international telecommunications services

Source: Government of Brunei Darussalam [Online]. Available at: http://brunei.sultanate.com/ [16 August 2000]; and information provided by the authorities.

12. In formulating and drafting trade policy, and depending on circumstances, the opinions of non-governmental bodies may be solicited although Brunei does not appear to follow a regular process of consulting with such bodies. One such recent example was the formation of a new body, the Brunei Darussalam Ministerial Economic Council, which was established in September 1998 to help Brunei to respond to the financial and economic crisis in the region. Its membership includes government officials and representatives of the business community. The Council was set the task of examining ways in which to revitalize the economy. The result was a report published in September 1999, which suggests both short- and long-term strategies to ensure long-term sustainable development (Chapter I(1)). Recommendations made by the Council are currently being implemented by the Economic Planning and Development Department in the Prime Minister's Office.

13. Brunei does not have an independent body to evaluate government policy. Under the Constitution, the Auditor General may prepare an annual audit of the financial statements to present to the Sultan and to the Cabinet at any time. The frequency for preparation of such reports is not Brunei Darussalam WT/TPR/S/84 Page 19

specified. According to the Audit Department, the main issue it is currently trying to address is an amendment to the Audit Act, giving the Department the mandate to conduct value-for-money audits. There is however a lack of data in several key areas, including national accounts, the stock of foreign assets managed by the BIA, government finance, balance-of-payments, the financial system and activities of government linked companies; this constitutes an impediment to transparency and public accountability as well as to the formulation and effective evaluation of trade and trade-related policies and measures.

(ii) Main trade-related laws

14. International treaties and agreements, once ratified by the Government of Brunei, must be adopted through enabling national legislation and gazetted in order to carry the force of law in Brunei Darussalam. Thus the provisions of the WTO Agreements do not apply in Brunei unless new or subsidiary legislation is passed to include them in Brunei's body of "written laws". However, to date, other than legislation on intellectual property rights and pending legislation on customs valuation, no new national laws relating to WTO provisions have been gazetted. Nevertheless, during the course of this review, the authorities indicated that the provisions of other WTO Agreements were being implemented by the Government of Brunei Darussalam in good faith.

15. Brunei's main trade and related laws include the Customs Act, and the Customs (Prohibition and Restriction on Imports and Exports Amendment) Order, as amended, which regulate customs procedures, and prohibitions and restrictions on imports and exports (Table II.2). Other trade-related laws include: the Agricultural Pests and Noxious Plants Act, which is used to maintain phytosanitary measures; the Quarantine and Prevention of Disease (Animals) Regulations, for ensuring animal health; and the Poisons Act, and Misuse of Drugs Regulations, for other health measures. Brunei also recently passed legislation on intellectual property rights, including for copyright and trade marks, to comply with its obligations under the WTO.

Table II.2 Main trade-related laws in Brunei Law Subject Customs Act (1955) Customs regulations; preferential tariffs; duty drawback Customs (Prohibition and Restriction on Imports and Exports) (Amendment) Import and export regulations/licensing Order (1955) Customs (Prohibition and Restriction on Imports and Exports) (Amendment) Import/export prohibitions Order (1955) Companies Act (1957) Registration of companies; company law Business Act (1958) Registration of business names Investment Incentives Act, Cap. 97 Investment Agricultural Pests and Noxious Plants Act (1962); Quarantine and Prevention Sanitary and phytosanitary regulations of Disease (Animals) Regulations; Poisons Act; Misuse of Drugs Regulations. Emergency (Public Health) (Food) Order, 1998 Food labelling Income Tax (Petroleum) Act Corporate tax on petroleum .. Corporate tax on non-petroleum and gas companies Excise Act Excise taxes Price Control Act (1974) Price controls Emergency (Copyright) Order, 1999 Copyright protection Emergency (Patents) Order, 1999 Patents protection Emergency (Trade Mark) Order, 1999 Trade marks Emergency (Industrial Designs) Order, 1999 Industrial designs Emergency (Layout Designs) Order, 1999 Layout designs of integrated circuits Financial Regulations, 1983 Government procurement

.. Not available. Source: Government of Brunei Darussalam. WT/TPR/S/84 Trade Policy Review Page 20

(3) TRADE AND INVESTMENT POLICY OBJECTIVES

16. As a founding Member of the WTO, and a contracting party to the GATT since December 1993, Brunei believes strongly that its economy will benefit from further multilateral trade liberalization.7 Brunei provides at least most-favoured-nation treatment (MFN) to all WTO Members. At the same time, regional agreements and trade liberalization in the regional context, particularly in ASEAN and APEC, are believed to be important and have been pursued to enhance access to regional markets. Brunei believes that regional and bilateral trade agreements, if consistent with WTO rules and disciplines, could serve as building blocks for multilateral trade liberalization through the WTO. In the context of the ASEAN Free-Trade Area (AFTA), Brunei has been reducing its tariffs, and plans to meet the liberalization deadline, set for founding ASEAN members, by 2002. Brunei also participates in other liberalization initiatives, including for services and investment (section (4)(ii) below).

17. Brunei's trade and investment priorities, however, are mainly determined by its dependence on natural resources and the need to diversify its economic base and export markets. Recent changes in the tariff and particularly foreign investment rules have been implemented with a view to developing certain sectors of the economy, which the Government believes will assist Brunei in achieving this goal of diversification. Brunei's small domestic market also makes it imperative that exports form an important part of its economic diversification strategy. As a result, a number of incentives are provided to develop industries that will also ensure growth in non-natural-resource-based exports, such as textiles and clothing. The incentives are provided mainly in the form of tax and tariff exemptions, for example under the Pioneer Status programme (Chapter III(4)(ii)(a)). Cooperative agreements with other ASEAN member countries, such as the Brunei Darussalam, Indonesia, Malaysia, Philippines – East ASEAN Growth Area (BIMP-EAGA), have also been pursued to attract foreign investment in targeted activities (section (4)(ii)(d) below).

18. Emphasis is also being placed on the development of trade and tourism, in particular, developing Brunei as a service hub for trade and tourism in the region. In the Seventh National Development Plan (1996-2000), for example, the Government has committed itself to building Brunei's infrastructure, such as port and airport services, in order to develop Brunei as a trans-shipment centre for trade in goods, as well as in tourism and other services.8 Other services, notably financial services, are also being developed to attract investment and to enhance Brunei's role as a provider of financial and other business services in the region.

(4) TRADE AGREEMENTS AND ARRANGEMENTS

(i) Multilateral agreements

19. Brunei became a founding Member of the WTO when it accepted the Marrakesh Agreement Establishing the WTO on 16 November 1994.9 Brunei became a contracting party to the GATT on 9 December 1993.

20. Brunei, as a developing country, has made use of transitional measures available under some of the WTO Agreements, notably Article VII of the GATT (Customs Valuation) and the Agreement

7 WTO document MTN.TNC/Min(94)/ST/39, 13 April 1994. 8 Government of Brunei Darussalam (1997). 9 WTO document WT/Let/1, 27 January 1995. Before a treaty is signed or ratified, it is normally submitted either directly to the Sultan or through the Cabinet. Signing or acceding to a treaty is normally delegated to a minister with the appropriate instruments of power or with consent from the Sultan; the Sultan may also choose to sign the treaty himself. Brunei Darussalam WT/TPR/S/84 Page 21

on Trade-Related Aspects of Intellectual Property Rights (TRIPS). According to the authorities, the Agreement on Customs Valuation has been implemented on an administrative basis and is to be fully implemented in 2001; legislation on customs valuation has not yet been enacted. In addition, new legislation on intellectual property rights has been enacted recently, including for copyright, trade marks, industrial designs, and layout-designs of integrated circuits, while legislation on patents is being finalized (Chapter III(4)(v)); Brunei appears to have no legislation to protect trade secrets.

21. In WTO bodies, Brunei has referred frequently to the difficulties experienced by developing countries in implementing the WTO Agreements and has called for further technical assistance to be provided.10 Given these difficulties, Brunei feels that the current work on trade and investment, trade and competition policy, and transparency in government procurement should be continued, but should remain at an exploratory stage. At the 1999 WTO Ministerial Meeting, Brunei stated that issues other than the mandated negotiations in agriculture and services needed to be closely examined before including them in any negotiations, to avoid overloading the work programme in the coming years; Brunei also declared that it would support new negotiations and negotiations on non-agricultural tariff liberalization if these included products of interest to developing countries and took into account their needs.11

22. Like all Members of the WTO, Brunei is required to make regular notifications of its laws and regulations to the WTO. The status of selected notifications, as of January 2001 is shown in Table II.3.

Table II.3 Status of selected notification requirements to the WTO, 1995 to January 2001 WTO Agreement Description of requirement Periodicity Most recent notification

Agreement on Agriculture (Art. 18.2) Domestic support Annual - Agreement on Agriculture (Art. 10 Export subsidies Annual - and 18.2) Agreement on Implementation of Laws and regulations Once, then changes G/ADP/N/1/BRN/1, Article VI of the GATT 1994 21 November 1996 (Art. 18.5) Agreement on Implementation of Anti-dumping actions taken Semi-annual G/ADP/N/59/Add.1/Rev.1 Article VI of the GATT 1994 25 October 2000 (Art. 16.4) Agreement on Subsidies and Laws and regulations Once, then changes G/SCM/N/1/BRN/1, Countervailing Measures (Art. 32.6) 18 March 1997 Agreement on Subsidies and Countervailing duty actions Semi-annual G/SCM/N/56/Add.1/Rev.1, Countervailing Measures (Art. 25.11) taken 26 October 2000 Agreement on Subsidies and Specific subsidies Annual G/SCM/N/3/BRN, Countervailing Measures (Art. 25.1); 22 November 1996 GATT 1994 (Art. XVI:I) Agreement on Safeguards (Art. 12.6) Laws and regulations Once, then changes G/SG/N/1BRN/1, 21 November 1996 Agreement on Safeguards (Art. 12.7) Pre-existing Article XIX Once, then changes - measures Table II.3 (cont'd)

10 WTO documents WT/MIN(98)/ST/87, 20 May 1998 and WT/MIN(99)/ST/99, 2 December 1999. 11 WTO document WT/MIN(99)/ST/99, 2 December 1999. The view that a new round of multilateral trade negotiations should be pursued in 2001 was also expressed by the APEC forum, of which Brunei is a member, but with the provisio that it would take into account the needs of developing countries (section (ii)(b) below). WT/TPR/S/84 Trade Policy Review Page 22

WTO Agreement Description of requirement Periodicity Most recent notification

Agreement on Import Licensing Laws and regulations Once, then changes - (Art. 1.4(a) and 8.2(b)) Agreement on Import Licensing Questionnaire on import Annual G/LIC/N/3/BRN/1, (Art. 7) licensing 10 April 1997 Agreement on Preshipment Inspection Laws and regulations Once, then changes G/PSI/N/1/Add.5, (Art. 5) bringing the Agreement into 3 February 1997 force Agreement on Rules of Origin Preferential and non- Upon entry into force G/RO/N/4, (Art. 5 and Annex II.4) preferential rules of origin 7 August 1995 G/RO/N/5, 1 November 1995 Agreement on Sanitary and Notification authority - G/SPS/GEN/167, Phytosanitary measures 9 March 2000 Agreement on Sanitary and Enquiry points - G/SPS/ENQ/11, Phytosanitary measures 2 November 2000 Agreement on Technical Barriers to Laws and regulations Once upon entry into force - Trade (Art. 15.2) Agreement on Technical Barriers to Acceptance of Code Once, then changes - Trade (Annex 3C) Agreement on Textiles and Clothing Safeguard decisions Once G/TMB/N/204/, (Art. 6.1) 16 January 1997 GATT 1994 (Art. XXVIII:5) Modification of schedule - G/MA/111, 12 October 2000 GATT 1994 (Art. 17(4)(a)) State trading activities Annual - GATT 1994 (Art. VII) Transitional measures under Once and then changes WT/Let/36, the Customs Valuation 8 November 1995 Agreement GATT Council for Trade in Goods Non-tariff measures Every two years G/MA/NTM/QR/1/Add.3, 21 January 1997 GATS (Art. III:4) Enquiry points Once, then changes S/ENQ/40, 26 March 1997 TRIMS (Art. 6.2) Publications in which TRIM Once, then changes G/TRIMS/N/2/Rev.8, may be found 19 July 2000 TRIPS (Art. 63.2) Laws and regulations Once, then changes - TRIPS (Art. 65.2 and 65.4) Transitional period Once -

Source: WTO documents.

23. Brunei has not been involved in any disputes in the WTO since 1995, either directly or on a third party basis.

(ii) Regional agreements

(a) ASEAN12

Overview

24. Brunei became a member of the Association of South East Asian Nations (ASEAN) on 8 January 1984.13 Accounting for around 15% of Brunei's exports and 48% of its imports in 1998, the regional grouping continues to play an important role in external trade for Brunei.

12 Unless otherwise indicated, this section is based on information obtained from the ASEAN internet website (http://www.aseansec.org). Brunei Darussalam WT/TPR/S/84 Page 23

25. As part of the Framework Agreement on Enhancing Economic Cooperation to accelerate regional economic growth, ASEAN set up the ASEAN Free-Trade Area (AFTA) in 1992. The AFTA, which was expected to reduce tariffs to between 0 and 5% for all trade between member nations by 2008, was brought forward at the Fifth ASEAN Summit in 1995, to the year 2003 for the six original founding members of ASEAN, and later, in response to the financial crisis that affected the region in 1998, to 2002. The Common Effective Preferential Tariff (CEPT) scheme is the main trade instrument of the AFTA and currently covers, on average, 90% of the tariff lines of all ASEAN member nations. Brunei has included 6,263 tariff lines in its CEPT tariff. Tariffs for these lines are expected to be reduced to a range of 0 to 5% by 2002 (Chapter III(2)(iv)(b)).14

26. Products excluded by members from their CEPT tariffs could be placed on the temporary exclusion list (TEL), or on the sensitive or general exclusion lists. Products on the TEL were to be transferred gradually to the inclusion list in five equal instalments of 20% annually, within five years beginning on 1 January 1995. For Brunei, this transition appears to have been completed as there are no products currently listed on its TEL. The products currently excluded by Brunei fall under the sensitive and general exclusion lists and include coffee and tea, under the sensitive list, and tobacco, alcohol, and motor vehicles, under the general exclusion list. The situation concerning the phased removal of items, such as tea and coffee, from the sensitive list (including the future schedule for applying CEPT rates in the range 0 to 5% to these items) was unclear to the Secretariat. The authorities state that items on the sensitive list (tea and coffee) should be phased into the CEPT by 2001 but not later than 2003 and will be subject to tariff reductions to 0 to 5% by 2010. According to the authorities, the main reason for listing motor vehicles on the general exclusion list is to curb the alarming increase in the number of motor vehicles, with the aim of reducing pollution.

27. Efforts have also been made to include agricultural products previously excluded from the CEPT scheme under the sensitive list, with some agricultural products being immediately included. However, at the 32nd ASEAN Economic Ministers Meeting, held in October 2000, which led to the signing of a protocol on 23 November 2000, members agreed to allow a temporary delay in tariff liberalization for those products still on temporary exclusion lists of the six original founding members of ASEAN as at 31 December 1999. To request such a delay, the member concerned is to write formally to the AFTA Council; the submission is then considered by the relevant ASEAN bodies and members and may result in compensation being paid to countries affected by the delay. The amount of the compensation is to be agreed upon between ASEAN members within 180 days of receipt of the submission.15 The target date for the complete elimination of all tariff barriers remains 2015 for the six founding nations (Brunei, Indonesia, Malaysia, the Philippines, , and Thailand) and 2018 for the rest (Cambodia, Laos, Myanmar, and Viet Nam).

28. Other agreements aimed at increasing intra-ASEAN trade, promoting greater integration of ASEAN economies, and increase investment in ASEAN countries, which have been signed in addition to the AFTA include the ASEAN Industrial Cooperation Scheme (AICO) and the ASEAN Investment Area (AIA). The AICO, signed in April 1996, aims to integrate ASEAN economies more closely and increase industrial output of the region, in addition to increasing foreign investment into the region.16 The AIA, which was signed in October 1998, aims to increase foreign investment from both ASEAN and non-ASEAN sources in the region by removing barriers to investment for all ASEAN investors by 2010 and for all investors by 2020. Sectors specified in the temporary exclusion

13 Originally formed in 1967, ASEAN currently includes Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand; and Viet Nam, in addition to Brunei. 14 APEC (2000a). 15 ASEAN Secretariat (undated a). 16 ASEAN Secretariat (undated b). WT/TPR/S/84 Trade Policy Review Page 24

and sensitive lists would be excluded.17 Most recently, ASEAN leaders adopted the e-ASEAN Framework Agreement at the Fourth ASEAN Informal Summit, held in November 2000 in Singapore. The Agreement aims to achieve digital readiness in six areas: connectivity, local content, electronic commerce, ICT goods and services, human resources development, and e-governance. Efforts to develop such digital readiness will include the development of an appropriate legal and regulatory environment as well as skills and proficiency in the use of information technology in the region.18

29. Further regional economic integration has been pursued under the ASEAN Vision 2020, adopted in 1997, aimed at achieving a free flow of goods, services, and investment and reducing economic disparities in the region by the year 2020. Economic cooperation between member States is also taking place in a number of areas including, customs procedures and valuation, intellectual property rights, standards and conformance, and investment, as well as sectoral liberalization.

Economic Cooperation with non-members

30. In addition to regional liberalization, ASEAN pursues cooperation with other inter- governmental organizations including the Andean Council, the Australia-New Zealand Closer Economic Relations (CER), the Economic Cooperation Organization, the Gulf Cooperation Council, MERCOSUR, the Rio Group, the South Asian Association for Regional Cooperation and the South Pacific Forum. Most ASEAN members are also active participants in the activities of the Asia Pacific Economic Cooperation (APEC) forum, the Asia-Europe Meeting (ASEM), and the East Asia–Latin America Forum (EALAF).

31. ASEAN also pursues bilateral cooperation with non-member States. In recent years annual dialogues have been held with China, Japan, and the Republic of Korea (ASEAN plus three) and resulted in a joint statement between ASEAN and each of these countries, which provides for a framework for cooperation towards the 21st century. ASEAN also maintains regular contact with its other "dialogue partners" including Australia, Canada, the European Union, India, New Zealand, the Russian Federation, the United States, and the United Nations Development Programme; cooperation with Pakistan is also pursued in certain sectors.

(b) APEC

32. Brunei is a founding member of the Asia Pacific Economic Cooperation (APEC) forum.19 Under the terms of the Bogor declaration of November 1994, Brunei intends to implement free trade and investment by 2020, as is expected of developing country members of APEC.

33. At their 1997 meeting in Vancouver, the heads of APEC States agreed to implement early voluntary sectoral liberalization (EVSL) in 15 sectors, of which nine were to be accelerated under the accelerated tariff liberalization (ATL) initiative.20 At their meeting in Kuala Lumpur in

17 ASEAN (1999). 18 ASEAN (2000). 19 Formed in 1989, APEC currently consists of Australia; Brunei Darussalam; Canada; Chile; China; Chinese Taipei; Hong Kong, China; Indonesia; Japan; Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Philippines; Russia; Singapore; Thailand; United States; and Viet Nam. 20 The 15 sectors were: automotive products; chemicals; civil aircraft; energy; environmental goods and services; fish and fish products; food; forest products; gems and jewellery; medical equipment and instruments; natural and synthetic rubber; oilseeds and oilseed products; toys; as well as a mutual recognition agreement for telecommunications products. Liberalization in nine of these sectors, chemicals, energy, environmental goods and services, fish and fish products, forest products, gems and jewellery, medical equipment and instruments and toys, as well as the mutual recognition agreement for telecommunications products were to be accelerated. Brunei Darussalam WT/TPR/S/84 Page 25

November 1998, APEC ministers confirmed that 16 APEC members would participate in the EVSL programme.21 It was also decided to pursue liberalization in the ATL sectors at the WTO. In June 1999, it was decided to pursue liberalization in the remaining six sectors at the WTO, although separated from the ATL package. Work on the EVSL in APEC is currently focused on non-tariff measures facilitation and economic and technical cooperation components of the sectoral initiatives.

34. As chair of APEC in 2000, Brunei's priorities included: continued efforts to advance trade and investment liberalization in the region; the development of human resources with an emphasis on capacity building; the development of small and medium-sized enterprises, and to enhance exchange of information between APEC and the business community; strengthening of information technology based sectors, and to address the growing problems of a "digital divide" in electronic commerce and information technology infrastructure.22 The APEC meeting in November 2000 called for a new round of multilateral trade negotiations to be launched in 2001. The new round, however, would be expected to be balanced and broad-based, responding to the interests and concerns of all WTO Members, particularly least developed and developing countries. APEC also agreed to continue a moratorium on customs duties on electronic commerce until the next WTO Ministerial Conference in 2001. Other issues discussed included the encouraging recovery of the region from the economic and financial crisis, and the need for continued structural reform, particularly of the banking and financial system, the recent volatility of petroleum prices, and the need to address the international digital divide and develop information technology.23

(c) ASEM

35. The Asia-Europe Meeting (ASEM) held its first summit meeting in Thailand in 1996, with the participation of seven ASEAN members24; the European Commission and the 15 members of the European Union; Japan; China; and Korea. The goal of ASEM is to build a political, economic and cultural relationship between the two regions. The second ASEM summit meeting, which was held in London, in April 1998, adopted a trade pledge to maintain open markets between participants in the ASEM dialogue despite difficulties experienced as a result of the Asian financial crisis, which erupted in 1997. The second summit also endorsed a trade facilitation action plan (TFAP), aimed at reducing non-tariff barriers, particularly with regard to customs regulations and procedures, standards, government procurement, and sanitary and phytosanitary measures.

36. The second ASEM Economic Ministers Meeting, which was held in Berlin in October 1999, adopted future action on the TFAP and extended a mandate for a further two years for the Investment Experts Group. The commitment to trade liberalization was reiterated at the third ASEM meeting held in Seoul, Korea, in October 2000. ASEM members agreed to intensify efforts to launch a new round of world trade liberalization talks "at the earliest opportunity".25 Other areas of cooperation in ASEM include science and technology and the environment.

(d) BIMP-EAGA

37. The Brunei Darussalam, Indonesia, Malaysia, Philippines – East ASEAN Growth Area (BIMP-EAGA) was formed in March 1994. It is composed of the entire area of Brunei; ten provinces in the Indonesian islands of Kalimantan, Sulawesi, Maluku and Irian Jaya; Sabah, Sarawak

21 Australia; Brunei; Canada; China; Hong Kong, China; Chinese Taipei; Indonesia; Japan; Korea; Malaysia; New Zealand; Papua New Guinea; Philippines; Singapore; Thailand; and the United States. 22 APEC (undated). 23 APEC (2000b). 24 Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Viet Nam. 25 Financial Times, 23 October 2000. WT/TPR/S/84 Trade Policy Review Page 26

and in Malaysia; and Mindanao and Palawan in the Philippines. With a total area of around 1.54 million square kilometres and a population of around 46 million, the BIMP-EAGA is the largest growth area in Asia. Its goal is to provide investment and trade opportunities to the business community through the pooling of common and complementary resources and infrastructure, and to encourage the free movement of resources across borders. The BIMP-EAGA, which identifies sectors for liberalization through the formation of working groups, including participation from both the private and the public sectors, has currently identified air linkages, sea linkages, construction, fisheries, and tourism, as fast-track sectors.26 Investment in these activities is encouraged through the provision, inter alia, of tax and non-tax incentives.

(iii) Bilateral agreements

38. Brunei does not have any bilateral trade agreements at present.

(5) FOREIGN INVESTMENT REGIME

(i) Overview

39. Foreign investment in Brunei is, in principle, open for all sectors except those deemed to be important for national food security and those based on local resources. Brunei also offers a number of attractions to foreign investors, including investment incentives, good physical infrastructure, and a stable macroeconomic environment. Nevertheless, investment procedures are not always obvious; approval is required at various stages without clear time limits indicated for each of these stages; and guidelines on which sectors or industries are important for national food security or require local participation are unclear. In addition, it is not clear whether a recently formed one-stop agency in the Ministry of Industry and Primary Resources has proved successful in attracting much-needed foreign investment and technical expertise, despite tax and other duty exemptions. These factors suggest that, despite the tax incentives offered, the authorities' degree of discretion in approving foreign investment projects may be a disincentive to foreign investors.

(ii) Legislative framework and investment procedures

40. Brunei does not have any legislation dealing specifically with foreign investment; nevertheless, the basic legislation on investment, the Investment Incentives Act (Cap. 97) promulgated in 1975, which is administered by the Economic Development Board in the Ministry of Finance, appears to allow foreigners to hold up to 100% of the equity in certain industries and activities in which the Government wishes to encourage investment (Table II.4). Activities relating to national food security and those based on local resources require some level of local participation; it is not clear to the Secretariat what these activities include, although it appears that a minimum 30% local investment is required in agriculture, fisheries, and food processing. Firms that operate in industries for the local market, that do not affect national food security, and that export, may be entirely foreign owned.27 Foreign nationals are not allowed to own land, but may lease land for industrial purposes, agriculture, forestry, and aquaculture on a long-term basis.28

26 Other sectors in which EAGA Working Groups have been formed are agri-industry, capital formation and financial services, energy, environmental protection and management, forestry, human resource development and people mobility, and telecommunications. 27 Ministry of Industry and Primary Resources (1993). 28 It is estimated that around 95.4% of land in Brunei is owned by the State; of the remaining 4.6%, 2.37% and 2.12% are owned by Bumiputra and non-Bumiputra, respectively (Brunei Darussalam Economic Council, 1999). Brunei Darussalam WT/TPR/S/84 Page 27

Table II.4 Preferred industries, associated activities, and products for investment Industry/activity Government support and assistance

Agriculture Assistance for infrastructure, technical and material inputs, Poultry farming training, marketing and location. Finance assistance is provided for local farmers/producers only. Cultivation of vegetables, medicinal plants, herbs and spices, fruit, rice and other cereals and floriculture Production of planting material Livestock farming Cultivation of coffee Cultivation of fodder crops or animal feed ingredients

Fisheries Support and assistance is available for infrastructure facilities, technical assistance, training, marketing and location. Finance Offshore/inshore fishing, aquaculture crustaceans and fish, and spawning, breeding or culturing of aquarium fish assistance is provided only for local producers, whereas material inputs are provided for offshore and inshore fisheries for local producers.

Forestry Assistance is provided for infrastructure facilities, technical Timber plantations, non-timber products, re-afforestation support, material inputs, training and location. Finance assistance is provided for local producers. Marketing assistance is available Processing and treatment of wood products, non-timber products, only for non-timber products. furniture and fixtures and integrated timber complex

Processed food Assistance is provided for infrastructure facilities, technical inputs, marketing and location. Assistance is not provided for Vegetables, tubers, roots, rice and other cereals, fruit, herbs and spices, medicinal plants and coffee material inputs nor for training for fish-meal/feed processing. Finance and training assistance is available for local producers. Livestock, poultry, eggs Fodder crops or animal feed ingredients Fish, convenience fishery products and fish-meal/feed

Manufactures Leather products and footwear Infrastructure facilities and for location. Finance assistance for local producers is also available. Electrical and electronic machinery including electrical power Assistance for infrastructure facilities and for location. Finance machinery and switching gear; electrical apparatus for medical assistance available for local producers only. purposes and radiological apparatus; telecommunications equipment; domestic electrical equipment; and equipment for distributing electricity Printed matter Assistance for infrastructure facilities and for location. Finance assistance available for local producers only. Pigments, paints, varnishes and related material; chemical Assistance for infrastructure facilities and for location. Finance materials and products n.e.s; fertilizers; soaps, cleansing and assistance available for local producers only. polishing preparations; and inorganic chemicals, oxides and halogen salts Medicinal and pharmaceutical products; essential oils, perfumes Assistance for infrastructure facilities, technical and material and flavouring materials inputs, marketing and location. Finance assistance available for local producers only. Ships and boats Assistance for infrastructure facilities and location. Finance assistance available for local producers only. Other industries including, perambulators, toys, games and Assistance for infrastructure facilities and location. Finance sporting goods; jewellery; and travel goods and similar articles. assistance available for local producers only. Silica products Assistance for infrastructure, material inputs, marketing and location. Finance assistance available for local producers only. Ceramic products and pottery Assistance for infrastructure, material inputs, marketing and location. Finance assistance available for local producers only. Table II.4 (cont'd) WT/TPR/S/84 Trade Policy Review Page 28

Industry/activity Government support and assistance

Metal products, containers for storage and transport, wire Assistance for infrastructure, marketing and location. Assistance products (excluding electric wiring), and fencing grills; nails, for material inputs also provided for metal products, containers for screws, nuts, bolts, rivets and similar parts of iron, steel and storage and for sanitary, plumbing, heating and lighting fixtures copper; hand held tools or machines; sanitary, plumbing, heating and fittings. Finance assistance available for local producers only. and lighting fixtures and fittings Non-metal products such as lime, cement and fabricated building Assistance for infrastructure, marketing and location. Material materials; clay construction material and refractory construction input assistance also available for clay construction material, material; and mineral manufacturing refractory construction material and mineral manufacturing. Finance assistance provided for local producers only. Apparel products; and textile products including synthetic and Assistance for infrastructure, and location. Marketing assistance regenerated (artificial) fibres, floor coverings, materials of rubber for apparel products, synthetic and regenerated fibres, and floor and plastics, and plastic material, regenerated cellulose and coverings also available. Finance assistance available for local artificial resins. producers only.

Source: Ministry of Industry and Primary Resources (1993), List of Preferred Industries, Associated Activities and Products, One Stop Agency.

41. The Ministry of Industry and Primary Resources is the main coordinating agency for investment and industrial development. The Ministry, through its Investment Services Sector, aims to provide a one-stop service to investors, assisting them in obtaining access to physical facilities, local resources, incentives, technical and production services, and administrative services. According to the Ministry, it will provide a response to the potential investor within two weeks of the application.29 Once the completed application has been submitted, the proposal is examined by the Projects Implementation Committee (PIC), followed by a Technical Committee and finally by Cabinet Ministers, before being approved.30 Both the PIC and the Technical Committees include strong representation from the Ministry of Industry and Primary Resources.31

42. The authorities state that the process of examination by these committees takes about 20 days. Once the project has been approved, there are three remaining stages: approval of detailed activities, costs, benefits, and implementation; approval of the physical details of the planned projects; and approval to begin operation. Projects not related to primary resources and manufacturing are examined by the District Office and Municipal Board. Additional licences may be required from other agencies for some activities, such as retailing outlets and financial institutions. All companies applying to invest in Brunei must first be locally incorporated under the Companies Act (Chapter III(4)(i)).

43. Despite these efforts, recent data appear to show that the net foreign investment position has not changed significantly, since 1995 (Chapter I(4)). In its report, presented in 1999, the Brunei Darussalam Economic Council recommended an investment promotion drive to encourage further investment. Measures suggested included: the establishment of an effective Investment Promotion Board; revision of the existing Investment Incentives Act and implementation mechanisms; expansion of the coverage of bilateral investment treaties; reviewing and, where necessary, removing restrictive regulations to create a more business-friendly environment; and introducing greater scope

29 Ministry of Industry and Primary Resources (1993). 30 Ministry of Development (undated a). 31 The PIC is chaired by Permanent Secretary of the Ministry of Industry and Primary Resources (MIPR) and includes participation by the Directors of the Investment Services Section, the Brunei Industrial Development Authority (BINA), the Agriculture, Forestry and Fisheries Departments, the Policy and Administration Section, and the Industrial and Tourism Promotion Section in the Ministry; the Technical Committee, also chaired by the Permanent Secretary of the Ministry, includes the Director of Special Duties in the Ministry of Finance as Deputy Chairman, the Directors of the Investment Services Section, BINA, the Agriculture, Forestry and Fisheries Departments, as well as representatives of the Permanent Secretaries of the Ministries of Development and Home Affairs. Brunei Darussalam WT/TPR/S/84 Page 29

for corporate ownership of property in Brunei.32 The current status of implementation of these recommendations is not clear.

(iii) Incentives

44. While the Ministry of Industry and Primary Products is responsible for approving investment projects, the Investment Incentives Act provides for a number of incentives, mainly in the form of tax exemptions, for companies that have been granted Pioneer Status and for the expansion of established enterprises. These incentives appear to be administered by the Economic Development Board, part of the Department of Economic Planning and Development since 1997, in the Ministry of Finance. Under the first scheme, any limited company with a Pioneer Status Certificate is granted an exemption from payment of corporate income tax, normally levied at a rate of 30%, for between two and five years depending on the level of fixed capital expenditure.33 The exemption begins on the first day of production and may be extended for a further three years. Pioneer Status companies are also exempt from payment of customs duty on plant, machinery, and equipment to be installed on its premises, and raw materials that are not available in Brunei and are to be used in the production of the pioneer products. The second scheme provides tax incentives for the expansion of enterprises already established in Brunei if the expansion is judged to be beneficial to Brunei and in the public interest (Chapter III(4)(ii)(a)).

(iv) Bilateral investment treaties

45. Brunei signed bilateral investment agreements with Germany and Oman in April and June 1998, and with Korea and China in November 2000.

46. Brunei also concluded tax treaties with the United Kingdom in 1950 and with Indonesia in 2000.

32 Brunei Darussalam Economic Council (1999). 33 The exemption is for two years for fixed capital expenditure of less than B$250,000; three years for fixed capital expenditure of between B$250,000 and B$500,000; four years for fixed capital expenditure of between B$500,000 and B$1 million; and five years for fixed capital expenditure of B$1 million and over (Ministry of Development, undated b).