Brunei's economy is almost entirely dependent on the export of crude oil and natural gas, which account for over half of the country's GDP and more than 90% of exports. The country's large oil exports keep its trade balance positive, and its citizens enjoy a high quality of life, with free education, medical care, and subsidized housing. However, this reliance on a single commodity makes the country vulnerable to market fluctuations, and the government has been working to diversify the economy by developing sectors such as agriculture, fisheries, tourism, and financial services.
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Brunei's economy is heavily dependent on oil and gas exports
Crude oil and natural gas production make up about 60% of Brunei's GDP and more than 90% of its exports. The petroleum sector alone accounts for over half of the country's GDP. Brunei is the third-largest oil producer in Southeast Asia, producing an average of about 180,000 barrels per day. It is also the ninth-largest producer of liquefied natural gas in the world. The country's oil production peaked in 1979 at over 240,000 barrels per day and has since been deliberately cut back to extend the life of oil reserves and improve recovery rates.
The majority of Brunei's oil and gas exports are destined for Asian countries. Japan has been the main customer for Brunei's oil exports, but its share dropped from 45% in 1982 to 19% in 1998. In contrast, oil exports to South Korea increased from 8% in 1982 to 29% in 1998. Other major customers include Taiwan (6%) and the countries of the Association of Southeast Asian Nations (ASEAN) (27%). Brunei's oil exports to the United States accounted for 17% of its total exports.
In addition to its oil exports, Brunei also has a significant liquefied natural gas (LNG) industry. The country is home to one of the largest LNG plants in the world, and over 82% of its LNG production is sold to Japan under a long-term agreement. Brunei has also supplied LNG to the Korea Gas Corporation since 1995. The country's natural gas production reached 90 cargoes per day in 1999.
While Brunei has made efforts to diversify its economy away from oil and gas, these initiatives have not yet been successful. The government has introduced policies and initiatives to develop sectors such as agriculture, fisheries, tourism, and financial services. In early 2021, the government released a blueprint for achieving economic growth through diversification, targeting five priority sectors for growth: downstream oil and gas, food, tourism, information and communications technology (ICT), and services.
In summary, Brunei's economy is heavily reliant on oil and gas exports, which provide a significant portion of the country's GDP and exports. While this has brought wealth to the country, it also makes Brunei susceptible to fluctuations in the global energy market. The government has recognized the need for diversification and is working to develop other sectors to reduce this dependence.
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The government is trying to diversify the economy
Brunei's economy is almost entirely dependent on its exports of crude oil and natural gas, which account for over half of the country's GDP and more than 90% of exports. This has made the country vulnerable to fluctuations in the price of oil, and the government has been trying to diversify the economy since the late 20th century.
In 2021, the government released a new blueprint for achieving economic growth, primarily through diversification away from oil. The document outlines a path towards more meaningful and high-value employment opportunities, with five priority sectors targeted for growth: downstream oil and gas, food, tourism, information and communications technology (ICT), and services.
The government has introduced policies and initiatives to develop other sectors, such as agriculture, fisheries, and financial services. Brunei has become self-sufficient in the production of poultry and eggs and is approaching self-sufficiency in vegetables. To curb fish imports, the government implemented programs to stimulate local fisheries, and within a decade, domestic production exceeded imports.
The government is also encouraging foreign direct investment (FDI) and has outlined measures to help indigenous businesses become more internationalized. Brunei's central location in Southeast Asia, good infrastructure, and stable political situation make it an attractive location for investors and long-term residents. The country has no sovereign debt and does not levy personal income, sales, or export taxes.
While Brunei has made progress in diversifying its economy, it will require further investment and policy developments to create a range of internationally competitive industries and strengthen the economy against external shocks.
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Brunei has a high GDP per capita
The country's high GDP per capita has resulted in a comfortable quality of life for its citizens. Citizens pay no taxes and receive free education through the university level, free medical care, and subsidized housing. Brunei has a well-educated and largely English-speaking population, excellent infrastructure, and a stable political situation.
The government of Brunei has prioritised diversifying the economy away from oil and gas, recognising the vulnerability of their economy to fluctuations in petroleum prices. They have made efforts to develop sectors such as agriculture, fisheries, tourism, and financial services. Brunei has also encouraged foreign direct investment and offered various investment incentives to attract more international businesses to the country.
Brunei's central location in Southeast Asia, good telecommunications and airline connections, and low utility costs make it an attractive location for investors and long-term residents. The country's large oil exports also contribute to a positive trade balance, further contributing to the country's economic stability and high GDP per capita.
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The country has no sovereign debt
Brunei's economy is almost entirely dependent on the export of its vast reserves of crude oil and natural gas. Petroleum and natural gas exports make up over half of its GDP. The country also has rich deposits of white quartz sand, although these remain largely undeveloped.
Despite this reliance on a single commodity, which is subject to market fluctuations, Brunei has no sovereign debt, neither domestic nor foreign. The country has not been the recipient of any economic aid. This is due to the country's large oil exports, which keep its trade balance positive. Brunei's exports for 2022 were mostly mineral fuels, with Australia, Japan, and China being the largest destinations.
The country's lack of sovereign debt can also be attributed to its low government spending and its ability to build foreign reserves by investing its petroleum revenues. However, since 1986, government spending has increased, and petroleum revenues have decreased, resulting in a budget deficit since 1988. The disappearance of revenue surplus has made the economy more vulnerable to fluctuations in the price of oil.
Brunei's economic stability is further threatened by its dependence on imports for most manufactured goods and food. The country's self-sufficiency in poultry, eggs, and vegetables has reduced its reliance on food imports, and it is now approaching self-sufficiency in rice production.
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Brunei is encouraging foreign investment
Brunei is a small, energy-rich sultanate on the northern coast of Borneo in Southeast Asia. The country boasts a well-educated, largely English-speaking population, excellent infrastructure, and a government intent on attracting foreign investment and projects. Here are some ways in which Brunei is encouraging foreign investment:
Investment Incentives:
The Ministry of Finance and Economy offers various investment incentives to encourage foreign direct investment (FDI) in the domestic economy. The Brunei Economic Development Board (BEDB), under the Ministry of Finance and Economy, is the government's frontline agency for promoting and facilitating foreign investment. BEDB evaluates investment proposals, liaises with government agencies, and obtains project approvals.
Streamlined Business Establishment:
Brunei has amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities from needing a license, and the Miscellaneous License Act (Amendment) of 2015 reduces wait times for new business registrants to start operations.
Open Economy:
Brunei has an open economy that is favorable to foreign trade and investment. The country recognizes the importance of FDI for its economic and technological development and is committed to economic diversification to reduce its reliance on oil and gas exports.
Tax Benefits:
Brunei offers tax incentives to businesses, including tax credits in specified sectors and no income, sales, or export taxes. The corporate income tax rate is 18.5%, and there is no personal income tax for citizens. Additionally, companies involved in the export of agriculture, forestry, and fishery products can apply for tax relief on export profits.
Stable Political Climate:
Brunei has a stable political climate and is generally sheltered from natural disasters. The country's central location in Southeast Asia, good telecommunications, and airline connections make it an attractive destination for investors.
Strong Infrastructure:
Brunei has excellent infrastructure, including good transportation and telecommunication networks. The country also has a well-educated and largely English-speaking population, making it a convenient location for foreign businesses to operate.
Intellectual Property Rights Protection:
Brunei has improved its protections for intellectual property rights (IPR) and established the Brunei Intellectual Property Office (BruIPO) to enhance enforcement and education on IPR issues.
Sovereign Wealth Funds:
The government of Brunei makes a significant share of outward investment through its sovereign wealth funds, managed by the Brunei Investment Agency (BIA). These funds are believed to be invested primarily in foreign portfolio investments and real estate, contributing to the country's economic development.
Free Trade Agreements:
Brunei is a member of the Association of Southeast Asian Nations (ASEAN) and has free trade agreements (FTAs) with Australia, New Zealand, China, India, and South Korea. The country also has bilateral investment treaties with several countries, promoting investment opportunities.
Attractive Lifestyle:
Brunei offers a comfortable quality of life for its citizens and residents. The country provides generous welfare benefits, including free education, free medical care, and subsidized housing. Additionally, Brunei's low crime rate, good schools, and excellent sports facilities make it an attractive location for short and long-term residence.
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Frequently asked questions
Brunei's economy is almost entirely dependent on the income derived from the sale of oil and gas, which represents 80% of Brunei's total exports and over 50% of the country's GDP.
The government has attempted to diversify the economy since the late 20th century by developing other sectors such as agriculture, fisheries, tourism, and financial services. In 2021, a fresh blueprint was released to achieve economic growth through diversification, with five priority sectors targeted for growth: downstream oil and gas, food, tourism, information & communications technology (ICT), and services.
Brunei's nominal GDP was USD 16.7 billion in 2022 and USD 15.1 billion in 2023. The GDP per capita was USD 34,226 in 2022, compared to the global average of USD 10,589.
In 2022, the largest destinations for Brunei's exports (mostly mineral fuels) were Australia, Japan, and China. The largest sources of imports were Malaysia, the UAE, and China. The top exported goods were oil and mineral fuels, organic chemicals, and industrial machinery. The largest import sectors were machinery and transport equipment, manufactured goods, and food.
The unemployment rate in Brunei averaged 7.6% in the decade to 2022.