The small nation of Brunei needs a broader “strategic plan” to diversify its economy away from oil expected to run out in about 27 years, a Southeast Asian economic think tank has warned. The Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) said in its latest annual advisory on Brunei Darussalam in mid-January 2022 that Brunei’s economy will face a “significant downside if it continues to be oil and gas-centric.” risk”. The country’s high reliance on the industry makes it “extremely vulnerable to domestic and foreign shocks” in the sector. Greater diversity…
The small nation of Brunei needs a broader “strategic plan” to diversify its economy away from oil expected to run out in about 27 years, a Southeast Asian economic think tank has warned.
The Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) said in its latest report Brunei Annual Consultation Report The report, published in mid-January 2022, said Brunei faces “significant downside risks” if its economy continues to be centered on oil and gas. The country’s high reliance on the industry makes it “extremely vulnerable to domestic and foreign shocks” in the sector.
More economic diversification “is not coming anytime soon,” the report said.
The research comes as Brunei’s crude oil production plunged to a record low in the third quarter of 2021 as a second wave of Covid-19 took its toll on the economy. Gross domestic product shrank to a negative 2.2 percent for the fourth consecutive quarter during the period, prolonging the country’s recession, according to official data from the country’s Ministry of Economic Planning and Statistics.
Less diversified than other oil-rich countries
Although Brunei has made progress in economic diversification in recent years, the country is still less diversified than other oil-rich economies such as the United Arab Emirates, Indonesia and Malaysia, the report said, adding that recent Expanding activities in the petrochemical industry, however, still depends on oil production.
While Brunei authorities have planned to expand the economy into non-oil industries since the late 1990s, there is still a lack of a clear and rigorous strategy for diversification and more attention should be paid to high value-added sectors such as ICT and creative industries, and reports Pointed out as business and financial services.
Financial support tax incentives
AMRO Brunei National Economist Andrew Tsang said that to formulate a strategic development plan, the country should coordinate different measures, including fiscal spending and tax incentives, to help develop certain high value-added industries.
Authorities should also encourage diversification through foreign direct investment incentive schemes and set up joint ventures to speed up infrastructure development to improve trade logistics and exports of non-oil and gas products, he added.
Focus on skill development
The Brunei government should also focus on human capital, improving the skills and education of the workforce to support diversity, Tsang said.
It added that Brunei should further adopt a unified strategic approach to develop MSMEs in the economy. For example, financial support programs for these enterprises should give priority to providing loans to enterprises in high value-added industries and formulate more favorable tax policies.
“Brunei’s revenue continues to be highly dependent on the oil and gas industry, and the economy as a whole is vulnerable to fluctuations in global energy prices and continued depletion of oil reserves,” Tsang said, adding that “the economy” is a top priority for the country.
