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The Government of His Majesty The Sultan of Brunei, through its Wawasan 2035, has set out the directions for its economic goals with a growing emphasis on attracting foreign direct investments (FDI) as an important driver of growth, focusing mainly on economic activities that bring new knowledge, new industries, new technologies, new markets as well as new business and employment opportunities for its people.
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Brunei is a small country bordering the South China Sea and Malaysia. Brunei became a British protectorate in 1888 and almost a century later, in 1984, it gained independence. The country became a constitutional monarchy and is ruled by sultan Hassanal Bolkia Mu'izzaddin. Brunei is very prosperous as it enjoys a vast presence of oil and gas resources. It has a very low unemployment rate of 3.7% and it is one of the wealthiest countries in Asia, with a nominal GDP per capita of USD 50,300 in 2010. As the source of its wealth is its massive hydrocarbon resources, the industrial sector dominates the structure of the economy with 74%. The services sector follows with 25%, while the agricultural sector is negligible with 1%. Hydrocarbon production accounts for about 50% of GDP and 90% of exports and government revenue, which highlights that the economy is fully dominated by the oil and gas sector. The government plans to diversify into Islamic banking and the IT-sector. Even investing in the development of only two sectors will very much improve the country’s prospects, given the fact that the labour force is very small with 188,800. As it is now, the public sector employs the majority of the population. The government is further trying to privatize several public sector enterprises. However, progress is slow regarding economic diversification and privatization as the government takes a gradual approach. If no new oil and gas fields are found though, the country will run out of oil in 20-30 years, thus speeding up diversification progress is advisable.
Brunei does not maintain a regular schedule of economic data releases, and is notoriously late with any data releases. Contributing to the decline were lower global oil and gas prices, combined with 4.6% lower output in the hydrocarbon sector. The non-hydrocarbon sector expanded by 0.9%. While this is a good sign, it must be noted that the non-hydrocarbon sector, many of which is state linked, is financed ultimately by oil and gas revenues. This means Brunei is still a long way from achieving a more balanced economic structure. Domestic consumption grew in 2009. Private consumption rose by 4.7% and government consumption 5.3%. Exports fell by 5.3%, mostly as a result from lower oil production and lower global oil prices. Brunei’s main trading partners are other Asian countries such as Japan, Indonesia, Singapore and Malaysia.
Economic growth of 1-2% is estimated for 2010, but economic data is expected to be released by the Brunei government not before September 2011. For 2011, at least 2% GDP growth is expected. Mostly, as Brunei’s main trading partners have experienced an economic recovery, this has resulted in sustained external demand. Obviously, the level of global oil and gas prices in 2011 also plays a large role. In the longer term, the sustainability of economic growth depends on the success of the country’s diversification efforts.
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