Country Report Brunei

Outlook for 2008-09

Brunei’s sultan, Hassanal Bolkiah, will retain autocratic powers over 2008-09, and is in a position to dictate the pace of implementation of plans for a partial democratisation of the sultanate. He has yet to indicate when this will take place, but continues to allow the Legislative Council (Legco, a largely appointed body) to hear presentations on the government budget. Legco was told to expect weak economic growth in 2008 owing to problems in the energy sector.

The political scene

No progress on Brunei’s supposed transition to limited democracy has been made yet, but the recent meeting of the Legco once again allowed mostly handpicked members to hear presentations on the budget. The Legco approved government plans to lower the corporation tax in order to boost the private sector. A Youth Congress was held, and produced a proposal for youth groups to nominate Legco members.

Economic policy

The government has expressed concern over the nation's relatively low standing in international rankings of GDP per head. The country is now ranked 34th, having been ranked first in the world in 1980. The government said that investment in education and technology would help the country to climb into the top ten again by 2035. Brunei’s private-sector workforce is largely foreign, but a cultural shift would be required to increase the proportion of Bruneians workers in the private sector.

The domestic economy

GDP data for the final two quarters of 2007 show that the energy sector continued to exert a large drag on overall growth, but that the non-energy sector grew sufficiently rapidly to allow real GDP growth to remain positive, at 0.6% for the year. However, less positively, the non-energy sector remains dependent on government spending. Inflation is creeping up in line with global food prices, but the headline inflation rate remains among the lowest in the region. The sultanate saw a large increase in tourist arrivals in 2007, and is hoping for a doubling in Chinese arrivals this year.

Foreign trade and payments

Brunei’s trade surplus fell sharply in 2007, reflecting a drop in oil receipts. Natural-gas exports were steady, but garment exports continued to fall as Brunei struggled to compete against regional producers. In sharp contrast, Brunei’s imports shot up by 19% in 2007, reflecting a surge in car purchases. A large surplus continues to be recorded on the trade account, but poor prospects for oil and gas output point to a further reduction in the trade surplus in 2008.