Brunei Darussalam Country Brief - December 2007

Introduction/overview

Geography

Brunei Darussalam is a Sultanate, which occupies 5,765 square kilometres on the north-west corner of the island of Borneo. Its capital, Bandar Seri Begawan, is situated on the Brunei River. Rainforest covers approximately 80 per cent of Brunei's landmass. Brunei claims a 200 kilometre Exclusive Economic Zone which overlaps with other claims in the South China Sea.

Population

It is estimated that approximately 70 per cent of Brunei's population (estimated in 2006 at380.000) is Malay. There are also significant Chinese and indigenous communities. Malay is the national and official language, although English is widely used in commerce, government and education.

Political Overview

Brunei is ruled by the Sultan and Yang Di-Pertuan of Brunei Darussalam, His Majesty Paduka Seri Baginda Sultan Haji Hassanal Bolkiah Mu'izzaddin Waddaulah, the 29th Sultan in one of the oldest continuous lines of monarchy in the world. The Sultan is the absolute monarch and patriarch of the people. On 10 August 1998, the Sultan's eldest son, His Royal Highness Prince Haji Al-Muhtadee Billah, was proclaimed Crown Prince of Brunei Darussalam and heir to the throne of Brunei.

Brunei is a Malay Muslim monarchy. His Majesty the Sultan is also the highest religious authority in the country. In 1959, Brunei achieved internal self-government. The British Resident was replaced by a High Commissioner and Sultan Omar Ali Saifuddien III (the father of the present Sultan) assumed full executive authority (though Britain retained control of Brunei's foreign relations). Brunei's first constitution, written in 1959, vested supreme executive authority in the Sultan.

In the 1962 District Council elections, the Brunei People’s Party (PRB) won 54 of the 55 seats. Later that year, the PRB won all elective seats in the Legislative Council. The Sultan delayed convening the Legislative Council and affirmed his intention of joining Brunei with Malaysia. In December 1962, the military wing of the PRB attempted a revolt. This was rapidly quelled with the assistance of British troops. Its leaders were forced into exile and the PRB was banned. No elections have been held since. Disagreements over financial arrangements and difficulties in determining the position of the Sultan among the Malay rulers ultimately resulted in Brunei declining to join the Malaysian Federation. The present Sultan came to the throne in 1967 after the abdication of his father, Sultan Omar Ali Saifuddien III.

Brunei gained full independence from Britain in 1984. Brunei’s Government was restructured into a formal ministerial system with the Sultan at its head as Prime Minister. The Sultan also serves as Minister of Defence and Minister of Finance. He is advised by and presides over four policy councils: the Religious Council; the Privy Council; the Council of Cabinet Ministers; and the Legislative Council.

Sultan Hassanal Bolkiah reconvened the Brunei Legislative Council on 25 September 2004 with 30 appointed members, including the Sultan and Cabinet ministers. Recent amendments provide for an expanded Council of up to forty five members, with the long-term possibility of fifteen elected members from Brunei's four districts.

In May 2005, the Sultan announced a major Cabinet reshuffle as well as the creation of a new ministry, the Ministry of Energy. The Crown Prince, His Royal Highness Prince Haji Al-Muhtadee Billah, now holds the position of Senior Minister at the Prime Minister's Office. The eleven other ministers in the Cabinet are from outside the royal family.

There are several political parties in Brunei, the most visible of which is the National Development Party (NDP).

Economic Overview

Brunei's economy is heavily dependent on revenue from oil and gas. Small scale manufacturers (mainly textiles and furniture) and primary production (including agriculture, forestry and fisheries) make up the rest of Brunei's merchandise economy.

Brunei imports nearly all of its major manufactured products and approximately 80 per cent of its total food requirements. Brunei has a low tariff regime and no capital gains or personal income tax, although private businesses pay company tax. Brunei operates a currency board system and has no central bank, with the Brunei Dollar (B$) being tied at parity with the Singapore Dollar. Both currencies are legal tender in Brunei and Singapore.

The Brunei Government is seeking to diversify the economy away from oil and gas as the primary source of revenue and economic activity by promoting private sector development in other industry sectors. The Brunei Economic Development Board (BEDB) was formed in November 2001 to stimulate the growth, expansion and development of the economy by promoting Brunei as an investment destination.

Brunei is also one of four participants in the Brunei, Indonesia, Malaysia, Philippines - East ASEAN Growth Area (BIMP-EAGA). The objective of BIMP-EAGA is to secure enhanced growth and development in this sub-region of ASEAN. On 25 November 2004 the Northern Territory's observer status in BIMP-EAGA was upgraded to that of Development Partner.

Recent Economic Performance

The International Monetary Fund (IMF) estimates Brunei’s GDP grew by 3.7 per cent in 2006 to US$ 11.4 billion, and expects GDP to grow by 2.6 per cent to US$ 12.03 billion in 2007. The IMF expects GDP to reach US$12.5 billion in 2008. GDP per capita was estimated to be US$ 30,415 in 2006. Goods exports accounted for 65.6 per cent of GDP in 2005. Recent growth was driven primarily by high global oil prices and strong demand from neighbouring Asian economies. In 2006, the rate of unemployment was 4 per cent and the rate of inflation was 0.5 per cent.

Economic Outlook

Brunei's oil and gas reserves are expected to last for at least the next two decades. A further 10,000 square kilometres has been opened up for deepwater oil exploration pending determination of the maritime boundary between Brunei and Malaysia, and it is hoped that this will increase oil and gas reserves, along with further exploration in existing production fields. Onshore acreage has also recently been opened up for exploration.

Brunei’s economy is vulnerable to movements in global oil prices and fluctuations in the oil price make it difficult to predict long-term prospects.

Australia-Brunei Bilateral Relations

Australia and Brunei enjoy a warm relationship with strong and growing links across a range of areas. Brunei is an important partner for Australia in the Commonwealth, APEC and multilateral organisations, including the UN and the World Trade Organisation.

Defence and Security Cooperation

Australia has a significant defence relationship with Brunei. Brunei looks to Australia as a regional source of training and military expertise. Exercises with the Royal Brunei Armed Forces have included reciprocal company level exercises and special forces exercises in Brunei. There have also been joint exercises with the Royal Brunei Navy (RBN), most recently Exercise Penguin in June 2006 which was a joint exercise between the RBN and the Royal Australian Navy.

Australia and Brunei signed a Memorandum of Understanding (MOU) on Cooperation to Combat International Terrorism on 15 February 2005 during the visit to Australia by His Majesty the Sultan of Brunei. The MOU provides for cooperation on security, finance, law enforcement, intelligence, customs, immigration and transport.

Educational Cooperation

Australia is developing a strong education and training relationship with Brunei and is keen to facilitate linkages between Australian and Bruneian education institutions, including increasing the number of Bruneian students undertaking Australian tertiary courses. Each year, around 700 Bruneian students study in Australia.

Bilateral Visits

His Majesty the Sultan of Brunei last visited Australia from 6-9 September 2007 to attend the APEC Economic Leaders Meeting held in Sydney. Prior to this, the Sultan made an official bilateral visit to Australia (his first such visit) from 15-20 February 2005. During the visit, the Sultan traveled to Canberra, Sydney and Perth and held discussions with the Governor-General and former Prime Minister Howard. The visit underscored the strong and enduring relationship between Australia and Brunei, especially in the areas of education, defence, trade and investment.

Over recent years there have been a number of other significant high level visits. During 2007, six Bruneian ministers visited Australia to attend various APEC ministerial meetings.

Bilateral Economic and Trade Relationship

An important focus of Australia's bilateral relationship with Brunei is trade and investment. The Bruneian Government owns two cattle stations in the Northern Territory and has interests in related industries.

Brunei was ranked as Australia's 35^th largest merchandise trading partner in 2006-07. However these rankings understate the level of transshipped trade between Australia and Brunei via Singapore. Total direct bilateral merchandise trade in 2006-07 was valued at $1.1 billion and Australia's imports of crude petroleum comprised $1.07 billion of this total. Australia's major exports to Brunei in 2006-07 were live animals ($3.8 million), meat (excluding bovine) ($2.7 million), fresh vegetables ($1.6 million) and milk and cream ($1.3 million).

In the services sector, many Australian teachers and other professionals work in Brunei. In 2006, Australia's service exports to Brunei (mainly education) were worth $47 million.

Australia and Brunei signed a Memorandum of Understanding (MOU) on new bilateral air services arrangements in March 2004. The MOU granted Royal Brunei Airlines (RBA) new access into Sydney and Melbourne. The airline commenced direct services to Sydney in October 2004, which built on RBA's existing services to Brisbane, Darwin and Perth. The bilateral air services arrangements were revised in April 2007, resulting in an increase in Australian carriers’ capacity to Brunei and an increase in RBA’s services to Australia.

Australian Trade and Investment Strategies

ASEAN-ANZ Free Trade Agreement

On 30 November 2004, the leaders of ASEAN, Australia and New Zealand announced that negotiations would commence on a free trade agreement (FTA) between Australia, ASEAN and New Zealand in early 2005. Brunei is uniquely involved in negotiations on the ASEAN-Australia-New Zealand Free Trade Agreement having taken on the role of ASEAN co-ordinator for the negotiations.

Export Opportunities

There are significant trade and investment opportunities in Brunei including in oil and gas, food and agriculture, financial and service sectors.

A joint halal food production and marketing export initiative was announced in February 2005, during the Sultan’s visit to Australia. Under this initiative, both countries agreed to examine ways to develop a high quality halal export industry combining Australia’s reputation as a producer of fresh, high quality food products with Brunei’s stringent halal certification standards. The Brunei Government launched the Brunei halal brand in August 2007, and 22 Australian companies participated in an international halal expo held in conjunction with the brand launch.

Australian Trade Commission (Austrade)

Austrade has identified potential opportunities for Australian suppliers of goods and services in a number of sectors. Austrade's Brunei country page supplies general information on doing business and on specific export opportunities. Austrade Brunei can also provide advice on accessing opportunities in Brunei.

Trade Watch Contacts

If you would like more information on the trade and economic conditions in Brunei, please email the Department of Foreign Affairs and Trade.

Trade and Investment Successes

Australian fertilizer company Incitec Pivot Limited is part of an international consortium which has been selected for a proposed ammonia/urea manufacturing complex in Brunei. WestSide Limited, a private company with majority Australian shareholding and Mitsubishi Corporation are equal partners with Incitec Pivot. The Brunei Economic Development Board selected the consortium from a global field of proponents. If the project proceeds, the plant would be the largest urea manufacturing operation in Asia with a capacity to manufacture 1.2 million tonnes of urea a year.

In September 2007, Australia’s Tap Oil Limited was awarded a 40% interest as operator in Block M, one of two onshore permits in Brunei. Block M covers an area of approximately 3,100 square kilometres located in the Baram Delta, an area rich in oil and gas reserves by world standards. Tap Oil Limited has committed to investing $20million in the appraisal of existing discoveries and exploration.

Australia-Brunei Darussalam Business Council

The Australia-Brunei Darussalam Business Council (ABDBC) was established in 1994 in response to the growing interest in trade and investment between Australia and Brunei. Australia was the first country to establish a bilateral business council with Brunei. The Council’s objectives were to foster friendship and understanding between the business communities of both countries, promote technical cooperation, trade, investment and tourism, and facilitate the development of new business strategies to enhance the business relationship between Australia and Brunei. The ABDBC’s founder and President is Mr Francis Wong.

Following are contact details for the President of the Council:

Telephone: 618 8221 5722
Facsimile: 618 82215001
Email: francis@encounter-australia.com.au

Or, care of:

Council for International Trade and Commerce South Australia (CITCSA)
136 Greenhill Road UNLEY SA 5061
Telephone: 618 8300 0110
Facsimile: 618 8300 0120
Website: www.citcsa.org.au