Brunei can benefit from Japan’s economic opening, if it happens

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Arno Maierbrugger
By Arno Maierbrugger

The recent visit by His Majesty Sultan Hj Hassanal Bolkiah Mu’izzaddin Waddaulah, the Sultan and Yang Di-Pertuan of Brunei Darussalam to Japan has been an important step to intensify and promote bilateral economic ties as Japan has entered a new era of consolidating and restructuring its economy.

Japan is especially interested in Brunei for its stable supply of liquefied natural gas (LNG), as its hunger for fossil energy has grown since most of its nuclear power plants have been suspended after the Fukushima accident in 2011.

Apart from that, Brunei currently has the rotating presidency of the Association of Southeast Asian Nations (ASEAN) and as such, is a springboard to other ASEAN economies through frequent summits being held in Brunei in 2013.

According to analysts, Japan’s economic restructuring and quantitative easing measures will have a significant impact on Southeast Asia’s monetary systems, and it will also encourage Japanese companies to invest more in the region, a fact that Brunei can capitalise on in order to move ahead with its own economic diversification into areas away from oil and gas production and processing.

Japan’s new Prime Minister Shinzo Abe has introduced what economists call ‘Abenomics’, an aggressive compilation of monetary, fiscal and economic growth strategies that entail curbing inflation, correcting the strong yen, expanding public investment by two per cent of gross domestic product in 2013 and, most of all, printing more money to pump it into the economy.

All that has triggered applause from outside, particularly from Japan’s direct neighbours, but also sets high expectations that Japan would not fall back into its nationalistic agenda that has hindered foreign companies and investors for decades to enter partnerships in many of Japan’s economic and industrial sectors, most of all banking, manufacturing and energy.

In fact, the government in Tokyo was not very active in opening its protected industries in the past even in the wake of the global financial crisis.

Though there has been movement in some areas as the cabinet recently approved a plan to open up the country’s power sector to more competition, much more needs to be done to lure foreign investment into the country and balance trade with the outside world, including Brunei.

The fact that Japan has entered talks on the Trans-Pacific-Partnership (TPP), a proposed regional free trade pact under negotiation of which Brunei is a member, could be a major milestone for Japan to change its external economic relations.

However, to fully join the TPP would entail to open the Japanese economy and allow access to highly isolated sectors such as agriculture, the car industry and the financial service industry.

Japan would also have to reduce trade tariffs which could have another negative impact on public finances. It would also require major changes in intellectual property rights policy, would raise issues of food security as the government would have to change the income compensation programme for farmers and the mode of land transactions, and would probably also lead to massive immigration of unskilled foreign workers.

Japan is at a critical juncture, and improving economic relations to other wealthy nations in the region, such as Brunei, can be seen as a major step to implement much-needed change.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

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Reading Time: 2 minutes

By Arno Maierbrugger

The recent visit by His Majesty Sultan Hj Hassanal Bolkiah Mu’izzaddin Waddaulah, the Sultan and Yang Di-Pertuan of Brunei Darussalam to Japan has been an important step to intensify and promote bilateral economic ties as Japan has entered a new era of consolidating and restructuring its economy.

Reading Time: 2 minutes

Arno Maierbrugger
By Arno Maierbrugger

The recent visit by His Majesty Sultan Hj Hassanal Bolkiah Mu’izzaddin Waddaulah, the Sultan and Yang Di-Pertuan of Brunei Darussalam to Japan has been an important step to intensify and promote bilateral economic ties as Japan has entered a new era of consolidating and restructuring its economy.

Japan is especially interested in Brunei for its stable supply of liquefied natural gas (LNG), as its hunger for fossil energy has grown since most of its nuclear power plants have been suspended after the Fukushima accident in 2011.

Apart from that, Brunei currently has the rotating presidency of the Association of Southeast Asian Nations (ASEAN) and as such, is a springboard to other ASEAN economies through frequent summits being held in Brunei in 2013.

According to analysts, Japan’s economic restructuring and quantitative easing measures will have a significant impact on Southeast Asia’s monetary systems, and it will also encourage Japanese companies to invest more in the region, a fact that Brunei can capitalise on in order to move ahead with its own economic diversification into areas away from oil and gas production and processing.

Japan’s new Prime Minister Shinzo Abe has introduced what economists call ‘Abenomics’, an aggressive compilation of monetary, fiscal and economic growth strategies that entail curbing inflation, correcting the strong yen, expanding public investment by two per cent of gross domestic product in 2013 and, most of all, printing more money to pump it into the economy.

All that has triggered applause from outside, particularly from Japan’s direct neighbours, but also sets high expectations that Japan would not fall back into its nationalistic agenda that has hindered foreign companies and investors for decades to enter partnerships in many of Japan’s economic and industrial sectors, most of all banking, manufacturing and energy.

In fact, the government in Tokyo was not very active in opening its protected industries in the past even in the wake of the global financial crisis.

Though there has been movement in some areas as the cabinet recently approved a plan to open up the country’s power sector to more competition, much more needs to be done to lure foreign investment into the country and balance trade with the outside world, including Brunei.

The fact that Japan has entered talks on the Trans-Pacific-Partnership (TPP), a proposed regional free trade pact under negotiation of which Brunei is a member, could be a major milestone for Japan to change its external economic relations.

However, to fully join the TPP would entail to open the Japanese economy and allow access to highly isolated sectors such as agriculture, the car industry and the financial service industry.

Japan would also have to reduce trade tariffs which could have another negative impact on public finances. It would also require major changes in intellectual property rights policy, would raise issues of food security as the government would have to change the income compensation programme for farmers and the mode of land transactions, and would probably also lead to massive immigration of unskilled foreign workers.

Japan is at a critical juncture, and improving economic relations to other wealthy nations in the region, such as Brunei, can be seen as a major step to implement much-needed change.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

Brunei Times logo

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