Market Access Plan 2015-2017
|Bandar Seri Begawan||0.4 million||5,765 km²||Brunei dollar (BND)|
Why Brunei Matters
Brunei Darussalam is:
- a priority emerging market under Canada’s Global Markets Action Plan;
- a leading oil and gas producer and exporter in Southeast Asia;
- a country with an educated and affluent population;
- engaged in the Trans-Pacific Partnership (TPP);
- centrally located in Southeast Asia; and
- a welcoming environment for would-be investors and a hub for economic activities in the region.
Brunei is an active member of the Association of Southeast Asian Nations (ASEAN), the Asia-Pacific Economic Cooperation (APEC), the Commonwealth and the World Trade Organization (WTO).
With a government intent on diversifying the economy and bringing foreign investment to Brunei, opportunities exist for Canadian companies to penetrate the market. Brunei’s stable political situation, combined with its regional air connections and strong telecommunication infrastructure, could make it an attractive regional hub.
Domestic Economic Environment
Brunei’s government revenues will continue to be almost entirely dependent on oil and gas over the near-to mid-term future, though the government remains committed to the Wawasan (National Vision) 2035, an economic plan designed to navigate the economy away from its heavy dependency on this sector by 2035.
According to the Economist Intelligence Unit, the 39 percent drop in annual average global oil prices in 2015 over 2014 and a smaller fall in liquefied natural gas costs will have a considerable impact on the Brunei 2015/16 government budget, with an expected deficit equivalent to approximately 7.9 percent of gross domestic product (GDP). It is also forecast that even if oil prices meet projected rises in 2016, Brunei may still experience a deficit equivalent to 4.4 percent of GDP. Notwithstanding these pressures, Brunei's huge financial reserves will be used to ride out a temporary plunge in global oil prices. Bruneians do not pay income tax, and citizens and permanent residents enjoy generous social benefits including free medical care.
The local labour force is only 189,500, and Brunei depends on another 52,200 foreign workers, in particular in the construction and service sectors as well as professional and technical fields. In 2014, Brunei’s total trade declined by 6.3 percent (in US dollar terms), mainly due to decreases in exports of natural gas and crude oil. Overall economic growth declined by 0.7 percent in 2014 and inflation remained subdued at -0.2 percent. Brunei's currency remains stable and is pegged to the Singapore dollar, an agreement that has been in place between the two countries for 48 years and was recently renewed.
Brunei publicly recognised the need to diversify its economy away from the oil and gas industry in 2014. As part of the nation’s strategy to supplement national production (and national revenue) through upstream international ventures, the Energy Department of Brunei committed to achieving an average annual growth of 6 percent or 100,000 barrels of oil equivalent per day through overseas production by 2035. Brunei’s non-energy sector may receive a boost with the establishment in late 2015 of the Asian Economic Community, although improvements to transportation infrastructure and a more business-friendly environment for SMEs will need to be put in place.
Foreign direct investment remains a key component in the diversification of Brunei’s economy. The Brunei Economic Development Board has recently attracted a number of successful acquisition projects, including by Canadian companies CAE and Viva Pharmaceuticals. These were followed by China’s Zhejiang Hengyi Petrochemicals investing in what is slated to be the largest oil refinery and aromatics complex in Brunei. A Japanese steel pipe threading plant is another important investment and is scheduled for production in 2016.
Since 2014, Brunei’s Ministry of Industry and Primary Resources has been active in signing memoranda of understanding with various countries as part of a plan to stimulate economic development by encouraging the establishment and expansion of certain industrial and economic enterprises. An effort to boost self-sustainability in the agricultural and aquaculture industries and on food security has had only a short-term economic impact.
|GDP per capita||$40,390|
|Canada’s merchandise exports||$10.6 million|
|Canada’s merchandise imports||$7.2 million|
|Canada’s service exports||not available|
|Canada’s service imports||not available|
|Foreign direct investment from Brunei into Canada||not available|
|Canadian direct investment in Brunei||confidential|
|Potential long-term annual export growth||1.7%|
Canadian Commercial Interests in Brunei
Canada’s merchandise exports to Brunei in 2014 amounted to more than $10.6 million, mostly in aerospace products, and machinery and equipment. Imports from Brunei to Canada during the same period were nearly $7.2 million (mainly methanol). Despite this relatively modest trade picture, there are a number of Canadian companies active in the market with investment projects and ongoing sales.
Official data concerning Brunei’s investments abroad are closely held. Based on information collected on the Brunei Investment Agency (BIA), its sovereign wealth fund is estimated at US$ 40 billion.
The BIA and related state-held investment vehicles (Darussalam Assets and Semaun Holdings) are positioned to draw from Brunei's huge fiscal reserves in order to leverage joint-venture opportunities, like those recently concluded with Canadian companies Viva Pharmaceuticals (with Simpor Pharma) and CAE (as CAE Brunei MPTC).
Key Elements for Exporters to Consider
Brunei is a small market (population 413,000), and competition in Brunei in all sectors is high. Many countries use the Brunei market as a gateway to Southeast Asia, investing heavily in promotion or having significant aid and capacity-building programs to open doors for their companies. Because of these reasons, Canada could be considered at a disadvantage when bidding. In addition, some Government of Brunei projects use a "by invitation only" tender process, which may reduce the opportunities for Canadian companies to bid.
Sector-specific Opportunities and Challenges
The aviation industry remains underdeveloped. It has seen constant restructuring of management and there is a need to recruit foreign expertise to assist in its development. Aerospace activities are highly regulated by the Department of Civil Aviation, with oversight by the Ministry of Communication, which results in extremely long processing and approvals. While Brunei has the infrastructure and well-equipped industrial hangars for large-scale maintenance, repair and operations, the lack of skilled and qualified technicians and professionals means that these facilities are not being used to capacity. Despite these challenges, Brunei is committed to nurturing this sector, which should allow Canadian companies to remain active and take advantage of opportunities in this traditionally important sector.
Agriculture and processed food
Given the strong influence of Islamic tradition in Brunei, there are continued opportunities for Canadian companies specialized in halal products and Islam-focused services. This includes not only food, but also pharmaceuticals, certification services and consumer products.
Defence and Security
Despite Brunei’s significant wealth, its small geographic and population size rules out consistent large-scale defence equipment purchases. Bruneian defence procurement is also subject to delays. Some of Brunei’s defence projects use a "by invitation only" tender process, which may reduce the opportunities for Canadian companies to bid. The Bruneian government is involved in a concerted effort to increase the country’s defence industry capability. Current reform efforts seek to emphasize long-term planning and enhanced efficiency.
Brunei is encouraging partnerships between local companies and foreign suppliers to improve services to the Royal Brunei Armed Forces. The Brunei International Defence Exhibition (BRIDEX), organised by the Royal Brunei Technical Services, is one platform used to connect domestic and foreign companies; other means are through referrals by embassies and high commissions and other international defence exhibitions. The intent of these efforts is to boost levels of self-reliance relating to the maintenance, repair, and overhaul of the Royal Brunei Armed Forces’ own equipment. The country's focus is on acquiring technological expertise through defence imports to maintain and support purchased systems and platforms.
The number of students from Brunei studying in Canada has been increasing. Although government scholarships were granted mostly to students studying in the United Kingdom, there has been an official interest in diversifying to other markets, including Canada. There is also an increasing need for technical and vocational training in Brunei to support its planned economic diversification, and Canadian institutions with this capability could profit from the opportunity, either in Canada or through partnerships to educate students in Brunei.
Information and Communications Technology (ICT)
ICT is seen as a promising sector in Brunei. With strong support from the government to develop this industry and a well-educated work force, Brunei is in a position to become a regional high-tech leader and is open to exploring Canadian capabilities in this industry.
In June 2015, the Brunei government announced that it will increase spending in ICT as it embarks on a new five-year strategic plan called the Digital Government Strategy 2015-2020, that focuses on a 'whole-of-government' approach towards innovation and efficient service provision, especially in education, security applications, and in pure research and development.
Oil and gas
The economy of Brunei is driven almost entirely by the oil and gas industry. However, with the price of oil at its lowest in many years, government revenues have fallen. Despite falling prices, the government has announced that it will push ahead with plans to increase production with the development of new deposits over the next decades. Industry watchers caution that remaining oil and gas reserves in the country are limited and new offshore deposits will be more costly to extract than those currently in production. Since the revenues from this industry fund economic activity in other sectors, including infrastructure, defence, aerospace and life sciences, there is concern that falling oil revenues could cause stagnation of the entire economy in the longer term.
Therefore, the government is looking to diversify the economy and move toward sectors that are independent or complementary to oil and gas. Consequently, a downstream hydrocarbon industry is being developed, skills development to establish a knowledge-based economy is being encouraged, and an information technology software industry is being actively nurtured primarily with government funding.
In the APEC Peer Review on Energy Efficiency in 2013, the Brunei government indicated that Brunei needs to develop renewable energy and improve energy efficiency.
Brunei acknowledged the constraint of its oil and gas resources. These constraints include: the country’s exceptionally large energy consumption per capita, the potential for incremental export revenue from saved energy, the social and environmental costs of energy wastage and unsustainably high energy subsidies.
In September 2013, the Minister of Energy announced a plan to introduce a feed-in tariff scheme to promote the use of solar power. Once implemented, individuals and businesses will be able to sell the electricity they generate back to the national energy firm. To encourage participation in this program, the government of Brunei is considering a number of incentives, including low-interest consumer loans on solar panels.
There are indications, however, of a gradual increase in interest from local businesses in sourcing Canadian capabilities in this sector. New infrastructure for water, sewerage and drainage is also being built, including dams, water treatment plants, reservoirs, pipe mains and storm drains to cater to growing demand by the private and public sectors.
Major Negotiations and Agreements
Trans-Pacific Partnership (TPP)
The TPP Agreement is the most comprehensive and ambitious regional trade agreement in the Asia Pacific and will deepen Canada’s trade ties in this dynamic and fast growing region. The TPP currently comprises 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam), representing a combined market of nearly 800 million people and a GDP of $28.5 trillion.
Bilateral Tax Information Exchange Agreement
Negotiations were concluded in September 2010 and the Tax Information Exchange Agreement (TIEA) was signed in May 2013. The TIEA entered into force on December 26, 2014. The TIEA assists Canada and Brunei’s respective tax authorities in combating international tax evasion by providing for the effective exchange of tax information. By reducing tax barriers, tax treaties support and encourage international trade and investment.
Selected Trade Initiatives – Seize the Opportunity!
- Study in Canada Information Session, annual
- Annual Study in Canada Fair, January 26-28, 2016
- ASEAN Consumer Fair, biannual
- Defence and Security
- Brunei Darussalam International Defence Exhibition and Conference (BRIDEX), December 7-10, 2015
- Trade Commissioner Service in Brunei Darussalam: The TCS offers foreign market intelligence, introductions in key networks, cost- and risk-reduction advice, business problem troubleshooting and on-the-ground support.
- High Commission of Canada in Brunei Darussalam: Canadian government offices abroad provide a variety of services, including consular services.
- Agriculture and Agri-Food Canada (AAFC): AAFC has representatives at the High Commission in Singapore. Trade Commissioners are part of the Agriculture and Food Trade Commissioner Service, comprising 33 positions in 20 markets around the world funded by Agriculture and Agri-Food Canada.
- Export Development Canada: With a regional office located in Singapore, EDC services include market knowledge, credit insurance, bank guarantees, foreign buyer financing, political risk insurance, foreign investments and foreign affiliate support.
- Canadian Commercial Corporation: CCC provides assistance with government-to-government contracting.
Where not otherwise indicated, the information is provided by the High Commission of Canada in Brunei Darussalam. This document is not intended to provide specific advice and should not be relied on as such. It is intended as an overview only. No action or decision should be taken without detailed independent research and professional advice concerning the specific subject matter of such action or decision. While Foreign Affairs, Trade and Development Canada (DFATD) has made reasonable efforts to ensure that the information contained in this document is accurate, DFATD does not represent or warrant the accurateness, timeliness or completeness of the information contained herein. This document or any part of it may become obsolete at any time. It is the user’s responsibility to verify any information contained herein before relying on such information. DFATD is not liable in any manner whatsoever for any loss or damage caused by or resulting from any inaccuracies, errors or omissions in the information contained in this document. This document is not intended to and does not constitute investment, legal or tax advice. For investment, legal or tax advice, please consult a qualified professional.
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