Brunei’s growth will depend on diversification

Arno Maierbrugger
By Arno Maierbrugger

The United Nation’s recently published Economic and Social Survey of Asia and the Pacific 2013 shed an interesting light on GDP growth expectations of the ten ASEAN member countries for this year, albeit the forecasts are a bit more optimistic than those of major banks and financial institutions. The highest real GDP growth forecast was given to Laos (8.1 per cent), followed by Cambodia (7.0 per cent) and Indonesia (6.6 per cent). Next in line were Myanmar (6.3 per cent), the Philippines (6.2 per cent), Vietnam (5.5 per cent), Thailand (5.3 per cent), Malaysia (5.0 per cent) and Singapore (3.0 per cent).

Ranked last is Brunei with a growth expectation of just 1.5 per cent, down from 1.6 per cent in 2012 and 2.2 per cent in 2011. Brunei is the only country besides Singapore that showed a slowdown in real GDP growth over these three years, and analysts mainly contribute this to a drop in oil and gas output, together will a fall in liquefied natural gas production. This shows how extremely dependent Brunei is on these particular commodities.

Because: If taken the hydrocarbon sector apart, data show that Brunei’s non-oil and gas sector growth rose by 4 per cent in 2012, driven mainly by expansion in government services, wholesale and retail trade, business services and water transport. Both figures taken together clearly illustrate that Brunei is in fact in a transition from an oil-dominant economy towards a more diversified economy. Under the national development strategy, “Vision 2035”, the Brunei government has increased spending on tertiary education, while making a commitment to reducing the country’s high level of energy intensity by exploring alternative energy as a potential source of business and job creation.

There have been other efforts in agriculture as well as in the financial sector, in fisheries, forestry, construction, tourism and manufacturing. While each of these sector might have is own problems and issues, and challenges remain in high production costs and competitiveness, pressure from cheaper imported products, as well as in the small and limited domestic market, the strategy is beginning to bear fruit.

In the case of Brunei, it will be small and medium companies that be the main driver of economic diversification. Thus, capacity building programmes for them are the first and foremost necessity and are already being implemented in many sectors. It is unlikely that large multinational companies will be the backbone of Brunei’s diversification, thus every initiative that support growth and resources for small and medium companies is essential, together with entrepreneurship programmes, continuous skills training, business development, improved access to financial services, as well as incentives for innovation and technology. Last but not least, the government will also have to communicate to the public that there now is a need to change one’s mindset and put effort in new non-oil business creation probably the most difficult part.

Do you think Brunei has achieved much on its way to offset dependence on the oil and gas business? What would be the most important measures in your view? Let us know through Twitter: @insideinvestor using hashtag #bruneitimes.

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

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

By Arno Maierbrugger

The United Nation’s recently published Economic and Social Survey of Asia and the Pacific 2013 shed an interesting light on GDP growth expectations of the ten ASEAN member countries for this year, albeit the forecasts are a bit more optimistic than those of major banks and financial institutions. The highest real GDP growth forecast was given to Laos (8.1 per cent), followed by Cambodia (7.0 per cent) and Indonesia (6.6 per cent). Next in line were Myanmar (6.3 per cent), the Philippines (6.2 per cent), Vietnam (5.5 per cent), Thailand (5.3 per cent), Malaysia (5.0 per cent) and Singapore (3.0 per cent).

Arno Maierbrugger
By Arno Maierbrugger

The United Nation’s recently published Economic and Social Survey of Asia and the Pacific 2013 shed an interesting light on GDP growth expectations of the ten ASEAN member countries for this year, albeit the forecasts are a bit more optimistic than those of major banks and financial institutions. The highest real GDP growth forecast was given to Laos (8.1 per cent), followed by Cambodia (7.0 per cent) and Indonesia (6.6 per cent). Next in line were Myanmar (6.3 per cent), the Philippines (6.2 per cent), Vietnam (5.5 per cent), Thailand (5.3 per cent), Malaysia (5.0 per cent) and Singapore (3.0 per cent).

Ranked last is Brunei with a growth expectation of just 1.5 per cent, down from 1.6 per cent in 2012 and 2.2 per cent in 2011. Brunei is the only country besides Singapore that showed a slowdown in real GDP growth over these three years, and analysts mainly contribute this to a drop in oil and gas output, together will a fall in liquefied natural gas production. This shows how extremely dependent Brunei is on these particular commodities.

Because: If taken the hydrocarbon sector apart, data show that Brunei’s non-oil and gas sector growth rose by 4 per cent in 2012, driven mainly by expansion in government services, wholesale and retail trade, business services and water transport. Both figures taken together clearly illustrate that Brunei is in fact in a transition from an oil-dominant economy towards a more diversified economy. Under the national development strategy, “Vision 2035”, the Brunei government has increased spending on tertiary education, while making a commitment to reducing the country’s high level of energy intensity by exploring alternative energy as a potential source of business and job creation.

There have been other efforts in agriculture as well as in the financial sector, in fisheries, forestry, construction, tourism and manufacturing. While each of these sector might have is own problems and issues, and challenges remain in high production costs and competitiveness, pressure from cheaper imported products, as well as in the small and limited domestic market, the strategy is beginning to bear fruit.

In the case of Brunei, it will be small and medium companies that be the main driver of economic diversification. Thus, capacity building programmes for them are the first and foremost necessity and are already being implemented in many sectors. It is unlikely that large multinational companies will be the backbone of Brunei’s diversification, thus every initiative that support growth and resources for small and medium companies is essential, together with entrepreneurship programmes, continuous skills training, business development, improved access to financial services, as well as incentives for innovation and technology. Last but not least, the government will also have to communicate to the public that there now is a need to change one’s mindset and put effort in new non-oil business creation probably the most difficult part.

Do you think Brunei has achieved much on its way to offset dependence on the oil and gas business? What would be the most important measures in your view? Let us know through Twitter: @insideinvestor using hashtag #bruneitimes.

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

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid