Brunei is located on the north coast of the island of Borneo, facing the South China Sea and surrounded by East Malaysia. It gained independence from the UK in 1984. Its economy is heavily resource-dependent, with the oil and gas sector accounting for some 60% of GDP and more than 90% of its export and fiscal receipts. Despite having the smallest population in ASEAN, Brunei’s per-capita income is the second highest in ASEAN after Singapore.
Brunei’s major exports are crude oil and liquefied natural gas (LNG), with Japan, Korea, India, Thailand and Singapore being its major markets. Manufactured goods, machinery and transport equipment are the main imports, which are mainly sourced from ASEAN neighbours Malaysia and Singapore, as well as from China, the US and Korea.
Supported by the recovery in fixed investment and growth in government expenditure due to increased oil revenues, Brunei’s economy is projected to recover gradually over the next two years.
In an attempt to diversify the economy to foster long-run economic stability, the government is promoting tourism, Islamic banking and manufacturing as outlined in Vision Brunei 2035. In addition, the government embarked on several initiatives to increase the role of private sector and attract FDI, such as establishing the FDI Action and Support Center (FAST) and Darussalam Enterprise (DARe) to support enterprises in the process of obtaining permits, licences and approvals. Brunei’s ranking in the World Bank Doing Business report improved from 72 in 2017 to 56 in 2018 (out of 190 economies). Meanwhile, in the Global Competitiveness Report 2017-2018, Brunei has moved up from 58 (out of 138 economies) to 46 (out of 137 economies).
As a member of the ASEAN Economic Community (AEC), Brunei has entered free trade agreements (FTAs) with China, Korea, India, Australia and New Zealand under the ASEAN context. The bilateral FTA with Japan was also entered into force in 2008. Besides, Brunei has participated in the negotiation of the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Chinese investment in Brunei has increased. In 2014, China and Brunei signed a deal to set up an economic corridor which aimed at creating some US$500 million of trade and investment in agriculture and food production. The Bank of China was granted approval to open its first branch in Brunei in April 2016. In February 2017, a Chinese-Brunei joint venture started managing the Muara Container Port, the country’s largest container terminal. Besides, China's largest private chemical-fibre supplier is building a refinery and petrochemical complex in Brunei with a total investment of US$3.4 billion for the first phase, which is expected to be completed by end-2018.
Brunei Economic Development Board (BEDB) promotes inward FDI and provides tax incentives for investment, with Halal, technology and creative industry, business services, tourism and downstream oil and gas as the priority areas. While the country levies no tax on either personal income or capital gain, there is a standard corporate tax rate of 18.5%, with a 55% rate applying to oil and gas companies.
Brunei’s cumulative FDI was US$5.7 billion as at end-2016, down from US$6.1 billion as at end-2015. Based on statistics from China’s Ministry of Commerce, Chinese cumulative FDI in Brunei was valued at US$203.8 million as at end-2016.