Weighing Brunei’s market potential in defence industry

Reading Time: 2 minutes
Arno Maierbrugger
By Arno Maierbrugger

With Brunei’s programme to diversify its industry in the coming years, questions arise as to which extent new sectors will be able to contribute to the country’s economy in order to substitute oil and gas revenues in the long term. Brunei’s development plan includes a shift towards other industries such as food and halal, information and communication as well as manufacturing. Not too much talk is, however, heard about an obvious sector which has a traditional presence in the Sultanate: The defence industry.

Inside Investor recently presented an overview on defence spending by ASEAN governments, and it turned out that Brunei plays a quite prominent role in the sector relative to its size. Though being the smallest country by population in ASEAN, it ranked 8th in defence spending ahead of Cambodia and Laos and close behind Myanmar with $460 million in budgeted defence spending in 2013. It is expected to experience further increases to reach $530 million or 2.8 per cent of GDP by 2015. They country is also investing an unknown amount in homeland security, an expenditure that is also expected to increase in order to fund cyber security efforts and to combat human trafficking, money laundering, piracy and terrorism.

Brunei has a small domestic manufacturing base which is particularly focused on the defence sector. Currently, Brunei does not export any arms to foreign countries as the domestic defence industry is not big and competitive enough. It currently imports arms from Germany and France and is also in talks with other countries such as China, Ukraine, Russia, Indonesia, and the US for military procurement. At present, domestic participation in the defence sector is restricted to the semi-government-owned military procurement firm Royal Brunei Technical Services, which manages the acquisition of systems, equipment and related material and services.

However, with efforts to increase the manufacturing base in the defence industry some market opportunities could open up for domestic players as well as foreign investors. These areas are maritime and air surveillance including instruments to monitor national airspace, disaster and humanitarian response devices, command and control electronic, intelligence, surveillance and reconnaissance, air defence, air combat, as well as cyber security.

At the moment, there is virtually no participation from the private sector in the country’s defence industry which could change and give the it room for rapid development. The next occasion to forge ties between the public and private sector will be the coming edition of Bridex, Brunei’s biannual defence exhibition, organised by the Ministry of Defence to be held from December 3 to 7, 2013. In 2011, the fair has attracted 163 companies, including large defence corporations such as Lockheed Martin, General Dynamics, EADS and others from 25 countries and 14,000 visitors in total, so the interest in the sector is relatively strong. While Brunei will still depend on military imports in the future, it could possibly increase its value creation in the defence industry by entering joint ventures with foreign majors to produce defence devices domestically, benefiting from its role as a politically and economically stable nation in a region that experiences tremendous growth and thus also will developed the demand.

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

Reading Time: 2 minutes

By Arno Maierbrugger

With Brunei’s programme to diversify its industry in the coming years, questions arise as to which extent new sectors will be able to contribute to the country’s economy in order to substitute oil and gas revenues in the long term. Brunei’s development plan includes a shift towards other industries such as food and halal, information and communication as well as manufacturing. Not too much talk is, however, heard about an obvious sector which has a traditional presence in the Sultanate: The defence industry.

Reading Time: 2 minutes

Arno Maierbrugger
By Arno Maierbrugger

With Brunei’s programme to diversify its industry in the coming years, questions arise as to which extent new sectors will be able to contribute to the country’s economy in order to substitute oil and gas revenues in the long term. Brunei’s development plan includes a shift towards other industries such as food and halal, information and communication as well as manufacturing. Not too much talk is, however, heard about an obvious sector which has a traditional presence in the Sultanate: The defence industry.

Inside Investor recently presented an overview on defence spending by ASEAN governments, and it turned out that Brunei plays a quite prominent role in the sector relative to its size. Though being the smallest country by population in ASEAN, it ranked 8th in defence spending ahead of Cambodia and Laos and close behind Myanmar with $460 million in budgeted defence spending in 2013. It is expected to experience further increases to reach $530 million or 2.8 per cent of GDP by 2015. They country is also investing an unknown amount in homeland security, an expenditure that is also expected to increase in order to fund cyber security efforts and to combat human trafficking, money laundering, piracy and terrorism.

Brunei has a small domestic manufacturing base which is particularly focused on the defence sector. Currently, Brunei does not export any arms to foreign countries as the domestic defence industry is not big and competitive enough. It currently imports arms from Germany and France and is also in talks with other countries such as China, Ukraine, Russia, Indonesia, and the US for military procurement. At present, domestic participation in the defence sector is restricted to the semi-government-owned military procurement firm Royal Brunei Technical Services, which manages the acquisition of systems, equipment and related material and services.

However, with efforts to increase the manufacturing base in the defence industry some market opportunities could open up for domestic players as well as foreign investors. These areas are maritime and air surveillance including instruments to monitor national airspace, disaster and humanitarian response devices, command and control electronic, intelligence, surveillance and reconnaissance, air defence, air combat, as well as cyber security.

At the moment, there is virtually no participation from the private sector in the country’s defence industry which could change and give the it room for rapid development. The next occasion to forge ties between the public and private sector will be the coming edition of Bridex, Brunei’s biannual defence exhibition, organised by the Ministry of Defence to be held from December 3 to 7, 2013. In 2011, the fair has attracted 163 companies, including large defence corporations such as Lockheed Martin, General Dynamics, EADS and others from 25 countries and 14,000 visitors in total, so the interest in the sector is relatively strong. While Brunei will still depend on military imports in the future, it could possibly increase its value creation in the defence industry by entering joint ventures with foreign majors to produce defence devices domestically, benefiting from its role as a politically and economically stable nation in a region that experiences tremendous growth and thus also will developed the demand.

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