Brunei

GDP (US$ Billion)

12.74 (2017)

World Ranking 125/192

GDP Per Capita (US$)

29,712 (2017)

World Ranking 31/192

Economic Structure

(in terms of GDP composition, 0217)

Services
(40.18%)
Industry
(58.75%)
Agriculture
(1.07%)

External Trade (% of GDP)

87.3 (2016)

Currency (Period Average)

Bruneian Dollar

1.38 per US$ (2017)

Political System

Monarchy

Overview

Brunei is located on the north coast of the island of Borneo, facing the South China Sea, and is surrounded by East Malaysia. Having gained independence from the United Kingdom in 1984. Its economy is heavily resource-dependent, with the oil and gas sector accounting for almost two-thirds of its GDP. The country's large foreign reserve assets, low external debt and high import cover reduce overall risks, although a dip in oil-related revenues may place pressure on fiscal revenues. While the country is largely seen in the international community as a producer of oil and gas, it is currently undertaking a number of projects in a bid to further diversify its economy. Furthermore, the country’s political stability, low rates of inflation, high standard of living and wealthy population (GDP per capita) provide tailwinds to Brunei's long-term growth.

Sources: World Bank, Fitch Solutions

 

Major Economic/Political Events and Upcoming Elections

April 2014
Brunei became the first East Asian country to adopt Shari’a law.

 

September 2016
Brunei ratified the Paris Agreement on climate change.

 

September 2018
South Korea signed new defence agreements with Brunei.

 

April 2019
The large Pulau Muara Besar refinery and petrochemical plant, a joint project between the Bruneian government and Hengyi, was set to come online in 2019.

 

Sources: BBC country profile – Timeline, Fitch Solutions

Major Economic Indicators
Graph: Brunei real GDP and inflation
 
Graph: Brunei real GDP and inflation
 
Graph: Brunei GDP by sector (2017)
 
Graph: Brunei GDP by sector (2017)
 
Graph: Brunei unemployment rate
 
Graph: Brunei unemployment rate
 
Graph: Brunei current account balance
 
Graph: Brunei current account balance
 

e = estimate, f = forecast
Sources: IMF, World Bank
Date last reviewed: June 13, 2019

External Trade

Merchandise Trade

Brunei merchandise trade
 
Brunei merchandise trade
 
 

Source: WTO
Date last reviewed: June 13, 2019

Graph: Brunei major export commodities (2017)
 
Graph: Brunei major export commodities (2017)
 
Graph: Brunei major export markets (2017)
 
Graph: Brunei major export markets (2017)
 
Brunei major import commodities (2017)
 
Brunei major import commodities (2017)
 
Graph: Brunei major import markets (2017)
 
Graph: Brunei major import markets (2017)
 

Note: Direct data not available for 2018
Sources: Trade Map, Fitch Solutions
Date last reviewed: June 13, 2019

 

Trade in Services

Brunei trade in services
 
Brunei trade in services
 
 

e = estimate
Sources: Trade Map, Fitch Solutions
Date last reviewed: June 13, 2019

Trade Policies
  • Brunei joined the World Trade Organization (WTO) in January 1995 and has been a member of the General Agreement on Tariffs and Trade (GATT) since December 1993.

  • The Customs Import Duty Order 2012 and Excise Duty Order 2012 were created to facilitate trade and to attract foreign direct investment. Basic foodstuffs and goods for numerous industrial uses are exempt from import duties. There is no tax on computers and peripherals. Excise duties are levied on certain goods, including cars at 20% and 15% for heavy vehicles. Other consumer products, such as perfume, cosmetics, clothes, carpets, shoes, jewellery, office equipment, telephones, television sets, lamps and cameras are taxed at 5%. Import duties are also 5% for electronically operated industrial machines.

  • Brunei views free trade agreements (FTAs) as a vital part of its foreign trade policy. To date, Brunei, through the Association of South East Asian Nations (ASEAN), has concluded FTAs with Australia, New Zealand, mainland China, India, Japan and South Korea.

  • Bilaterally, Brunei has concluded an Economic Partnership Agreement (EPA) with Japan (the Brunei-Japan EPA) and a multilateral agreement with Chile, New Zealand and Singapore (the Trans-Pacific Strategic EPA) (TPSEP).

  • As the signatories to the TPSEP, Brunei is involved in the negotiations for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

  • Brunei is emphasising its halal food industry as one of its key industries in an effort to diversify its economy. The country is promoting its own halal food certification regime that is entirely different from other halal certification organisations, which requires Bruneian inspectors to travel to production facilities in the country of the food exporter, at the exporter’s expense, to inspect the food production process.

Sources: WTO – Trade Policy Review, Fitch Solutions

Trade Agreement

Multinational Trade Agreements

Active

  1. ASEAN-mainland China: The ASEAN-mainland China FTA covers goods and services. The FTA for goods came into force on January 1, 2005, and the FTA for services came into force on July 1, 2007. The agreement aims to eliminate tariffs, encourage investment and address the barriers that impede the flow of goods and services. The ASEAN-mainland China Free Trade Area came into force on January 1, 2010, and was upgraded in 2014. In 2017 (latest complete data) ASEAN was the recipient of 12.3% of mainland China's exports and the source of 12.8% of imports. Total merchandise trade between ASEAN and mainland China grew by 215% between 2005 and 2016 (latest data available).

  2. ASEAN-India: The ASEAN-India trade in goods agreement came into force on January 1, 2010 for goods and on July 1, 2015 for services with the aim of minimising barriers and deepening economic linkages between the parties. The agreement will lead to the progressive elimination of tariffs on all goods. ASEAN accounted for 10.2% of India's imports and 12% of India's total exports in 2017.

  3. ASEAN-South Korea: The ASEAN-South Korea FTA (AKFTA) came into force in June 2007 and May 2009 for goods and services respectively. The investment agreement entered into force in June 2009. AKFTA aims to create more liberal, facilitative market access and investment regimes between South Korea and ASEAN. A business council was set up in December 2014 to enhance economic cooperation between the parties and boost total trade to USD200 billion by 2020. ASEAN was the recipient of 11.2% of South Korea's exports in 2017 and the source for 16.6% of imports. Total trade between ASEAN and South Korea grew by 68% between 2007 and 2017.

  4. ASEAN-Japan FTA: Japan provides a huge market for a wide range of goods, with tariff-free trade. This benefits a number of important sectors, including manufacturing, agriculture, mining and chemicals production.

  5. ASEAN-Australia-New Zealand: The ASEAN-Australia-New Zealand FTA and Economic Integration Agreement for goods and services came into force on January 1, 2010.

  6. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong and ASEAN commenced negotiations on the creation of of an FTA and an Investment Agreement in July 2014. After 10 rounds of negotiations, Hong Kong and ASEAN announced the conclusion of the negotiations in September 2017 and drafted the agreements on November 12, 2017. The agreements are comprehensive in scope, encompassing trade in goods and services, investment, economic and technical co-operation, dispute settlement mechanism and other related areas. The agreements will bring legal certainty, better market access and fair and equitable treatment in trade and investment, thus creating new business opportunities and further enhancing trade and investment flows between Hong Kong and ASEAN. The agreements will also extend Hong Kong's FTA and Investment Agreement network to cover all major economies in South East Asia. The agreement came into force on January 1, 2019, but it will take time for all members of ASEAN to comply as implementation is subject to completion of the necessary procedures. Hong Kong is a key export market and the reduction of tariffs will ease the trading process; Hong Kong's potential as a key export market increases the importance of AHKFTA.

  7. CPTPP: The agreement – comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – is in effect. The agreement was ratified in Q418, with the deal representing 13.4% of global GDP, making it the third largest trade agreement after the United States-Mexico-Canada Agreement (USMCA) and the EU. The agreement aims to cut tariffs, improve access to markets and set common ground on labour and environmental standards as well as intellectual property protections.

Sources: WTO Regional Trade Agreements database, Ministry of Foreign Affairs (Brunei), Fitch Solutions

Investment Policy

Foreign Direct Investment

Graph: Brunei FDI stock
 
Graph: Brunei FDI stock
 
Graph: Brunei FDI flow
 
Graph: Brunei FDI flow
 

Source: UNCTAD
Date last reviewed: June 13, 2019

 

Foreign Direct Investment Policy

  1. Brunei has an open economy that is favourable to foreign direct investment (FDI) as the government continues its economic diversification efforts to limit its long reliance on oil and gas exports.

  2. In 2014, Brunei released an Energy White Paper outlining its vision of leveraging its oil wealth to diversify its economy, create local employment, increase FDI and sharply increase the use of renewable energy by 2035.

  3. Brunei encourages FDI in the domestic economy through various investment incentives offered by the Energy and Industry Department, the prime minister’s office, and through activities conducted by the Ministry of Foreign and Trade and the Brunei Economic Development Board.

  4. Major FDI projects underway include the Hengyi Refinery at Pulau Muara Besar and Brunei Fertilizer Industries at the Sungai Liang Industrial Park. These projects contribute towards achieving the Vision 2035 development plan.

  5. Brunei amended its laws to make it quicker and easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities (eateries, boarding and lodging houses and other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations including places for storing petrol and inflammable material; timber store and furniture factories; and retail shops and workshops) from needing to obtain a business licence. The Miscellaneous License Act (Amendment) of 2015 reduces the wait times for new business registrants to start operations, with low-risk businesses, such as eateries and shops able to start operations immediately.

  6. There is no restriction on total foreign ownership of companies incorporated in Brunei. The Companies Act requires locally incorporated companies to have at least one of the two directors – or if more than two directors, at least two of them – to be ordinarily resident in Brunei, but exemptions may be obtained in some circumstances. The rate of corporate income tax is the same whether the company is locally or foreign owned and managed.

  7. Companies involved in the exportation of agriculture, forestry and fishery products can apply for tax relief on export profits. For non-pioneer enterprises, the tax relief period is eight years and up to 11 years for pioneer enterprises.

  8. The corporate income tax rate in Brunei has been reduced from 30% (2007 and earlier) to the current rate of 18.5% (from 2015 onwards).

  9. Currently the government’s focus is on attracting investments in diversified sectors such as agriculture, aquaculture, biotechnology, business process outsourcing, downstream oil and gas, food processing, data centre hosting, digital media, financial services, the Halal food industry, Internet of Things, medical tourism, petrochemicals, and transport and logistics.

Sources: WTO – Trade Policy Review, The International Trade Administration, US Department of Commerce, EY, Borneo Bulletin, Fitch Solutions

 

Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive Programme Main Incentives Available
Muara Export Zone (MEZ) Muara Port is Brunei's main seaport with an established free trade zone called the MEZ, which was established to promote and develop Brunei as a trade hub of the region.

Key advantages for businesses include:

– Subsidised warehousing and industrial space
– Access to a deep sea port
– Various tax incentives, including exemption from corporate income tax for 15 years

Sources: Government websites, Fitch Solutions

Taxation – 2019
  • Value Added Tax: 0%
  • Corporate Income Tax: 18.5%

Source: Brunei Darussalam Ministry of Finance and Economy

 

Business Taxes

Type of Tax Tax Rate and Base

Resident company: Corporate Tax

18.5% charged on a threshold basis as follows:

- 25% for first BND100,000 attracts income tax of 18.5%
- 50% of the next BND150,000 is taxed at 18.5%
- The balance after this is taxed at 18.5%
Income Tax for companies engaged in the exploration and production of oil and gas 55%
Withholding Tax - Dividends: 0%
- Interest: 2.5% to a non-resident
- Royalties: 10% to a non-resident
Capital Gains Tax 0% (activities otherwise taxed as part of income tax)
Sales Tax 0%
Social security contributions 5% of gross salaries to be paid by employer

Source: Brunei Darussalam Ministry of Finance and Economy
Date last reviewed: June 13, 2019

Foreign Worker Requirements

Foreign Worker Permits

Brunei seeks to increase the number of Bruneians working in the private sector. Brunei's 2014 Energy White Paper calls for the number of people employed in the energy sector to increase from 20,000 in 2010 to 50,000 in 2035, and for the number of locals employed in the sector to increase from 10,000 to 40,000 during the same period. To advance this goal, all companies competing for a tender in the oil and gas industry are required to have at least half of their employees be Bruneian.

The authorities in Brunei have introduced a foreign worker licence – or Lesen Pekeria Asing. Before applying for the licence, employers need clearance from JobCentre Brunei and must obtain an endorsement from the Employees Trust Fund (Lesen Pekerja Asing).

 

Visa Selection

Expatriate employment is controlled by a labour quota system administered by the labour department and the issuance of employment passes by the immigration department. Brunei allows new companies to apply for special approval to expedite the recruitment of expatriate workers in selected positions.

Foreigners coming to Brunei for employment purposes need a valid employment visa and employment pass before entering the country. However, there are some exceptions to this rule, with residents from certain countries (Cambodia, Canada, Indonesia, Japan, Laos, Liechtenstein, Maldives, Myanmar, Norway, mainland China, the Philippines, Peru, Qatar, Switzerland, Thailand and Vietnam) able to visit Brunei without an employment visa for a period of 14 days. Citizens of Australia, Iceland, Malaysia, New Zealand, Norway, Oman, Singapore, South Korea, the United Arab Emirates and Ukraine may travel without an employment visa for a maximum period of 30 days. Citizens of the United States and the European Union are allowed a visa-free business visit for 90 days.

Sources: Government websites, ASEAN Briefing, Fitch Solutions

Risks

Sovereign Credit Ratings

  Rating (Outlook) Rating Date
Moody's Not Rated N/A
Standard & Poor's Not Rated N/A
Fitch Ratings Not Rated N/A

Sources: Moody's, Standard & Poor's, Fitch Ratings

 

Competitiveness and Efficiency Indicators

  World Ranking
2017 2018 2019
Ease of Doing Business Index 72/190 56/190 55/190
Ease of Paying Taxes Index 89/190 104/190 84/190
Logistics Performance Index N/A 80/160 N/A
Corruption Perception Index 32/180 31/180 N/A
IMD World Competitiveness N/A N/A N/A

Sources: World Bank, IMD, Transparency International

 

Fitch Solutions Risk Indices

  World Ranking
2017 2018 2019
Economic Risk Index Rank N/A 88/202 88/202
Short-Term Economic Risk Score 50.6 51.9 51.5
Long-Term Economic Risk Score 52.5 53.5 54.1
Political Risk Index Rank N/A 87/202 87/202
Short-Term Political Risk Score 90.8 90.8 90.8
Long-Term Political Risk Score 65.1 65.1 65.1
Operational Risk Index Rank N/A 53/201 51/201
Operational Risk Score 59.2 61.4 62.0

Source: Fitch Solutions
Date last reviewed: June 13, 2019

 

Fitch Solutions Risk Summary

ECONOMIC RISK

Brunei's economic recovery is expected to firm up in 2019, supported by stronger overseas orders and the government's diversification plans. This would mark an end to the multi-year recession caused by the dip in energy prices since mid-2014. Going forward, growth will likely be underpinned by an improving business environment, strong and rising Chinese investment, and the higher oil price. Nevertheless, the economy remains vulnerable to fluctuations in commodities prices. The manufacturing sector will likely continue to struggle to take off; however, the improvement in the business environment should aid the sultanate's plan to diversify the economy away from oil and gas into banking and financial services. Furthermore, the high standards of living and wealthy population (GDP per capita) provide tailwinds to Brunei's long-term growth.

OPERATIONAL RISK

Energy-rich Brunei boasts strong infrastructure and a government intent on attracting foreign investment and projects. Brunei enjoys a high level of political stability compared with the rest of the region and the country has made efforts to attract foreign investment and create an open and transparent investment regime. This trend is likely to remain in place over the short- to medium term supported by extensive welfare services funded by wealth derived from oil and gas, an absolute monarchy and limited external threats. With a relatively free and open trading regime, as well as a small, but highly educated workforce, Brunei sees engagement on FTAs as an important step in ensuring that its people, goods, services and investments have continued access to wider markets around the world. However, registering property and trading across borders remain cumbersome, and together with an expensive and small labour force Brunei's operational risk environment must develop further if it is to catch up with its larger Association of South East Asian Nations peers.

Source: Fitch Solutions
Date last reviewed: May 19, 2019

 

Fitch Solutions Political and Economic Risk Indices 

Graph: Brunei short term political risk index
 
Graph: Brunei short term political risk index
 
Graph: Brunei long term political risk index
 
Graph: Brunei long term political risk index
 
Graph: Brunei short term economic risk index
 
Graph: Brunei short term economic risk index
 
Graph: Brunei long term economic risk index
 
Graph: Brunei long term economic risk index
 

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: June 13, 2019

 

Fitch Solutions Operational Risk Index

  Operational Risk Labour Market Risk Trade and Investment Risk Logistics Risk Crime and Security Risk
Brunei Score 62.0 61.6 60.7 55.1 70.6
East and Southeast Asia Average 55.2 55.9 56.7 53.8 54.4
East and Southeast Asia Position (out of 18) 7 7 8 10 5
Asia Average 48.5 49.7 48.2 46.0 50.1
Asia Position (out of 35) 7 7 8 12 5
Global Average 49.7 50.3 49.8 49.0 49.8
Global Position (out of 201) 51 34 61 72 38

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Brunei vs global and regional averages
 
Graph: Brunei vs global and regional averages
 
Country Operational Risk Labour Market Risk Trade and Investment Risk Logistics Risk Crime and Security Risk
Singapore 82.9 78.2 88.6 75.0 89.7
Hong Kong 81.9 72.3 88.8 77.1 89.5
Taiwan 73.6 65.5 76.2 73.4 79.2
South Korea 72.5 65.9 71.4 79.8 73.1
Malaysia 68.4 63.9 73.6 75.8 60.5
Macao 62.1 61.7 66.5 52.1 68.0
Brunei 62.0 61.6 60.7 55.1 70.6
Thailand 59.1 55.7 67.2 68.5 45.2
Mainland China 58.1 53.8 57.7 66.2 54.4
Indonesia 53.2 54.4 53.3 56.8 48.4
Vietnam 52.8 47.8 56.6 55.6 51.3
Mongolia 51.2 56.0 53.8 40.9 54.1
Philippines 45.4 57.1 50.7 42.5 31.3
Cambodia 41.3 44.5 43.7 37.6 39.5
Laos 36.5 40.6 34.5 34.1 36.7
Myanmar 32.7 43.9 31.9 30.0 24.9
North Korea 30.9 45.8 18.5 28.8 30.8
Timor-Leste 29.4 37.9 27.8 19.6 32.5
Regional Averages 55.2 55.9 56.7 53.8 54.4
Emerging Markets Averages 46 48.1 46.5 44.7 44.8
Global Markets Averages 49.7 50.3 49.8 49.0 49.8

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: June 13, 2019

Hong Kong Connection

Hong Kong’s Trade with Brunei

Graph: Major export commodities to Brunei (2018)
 
Graph: Major export commodities to Brunei (2018)
 
Graph: Major import commodities from Brunei (2018)
 
Graph: Major import commodities from Brunei (2018)
 

Note: Graph shows the main Hong Kong exports to/imports from Brunei (by consignment)
Date last reviewed: June 13, 2019

Graph: Merchandise exports to Brunei
 
Graph: Merchandise exports to Brunei
 
Graph: Merchandise imports from Brunei
 
Graph: Merchandise imports from Brunei
 

Note: Graph shows Hong Kong exports to/imports from Brunei (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: June 13, 2019

  2017 Growth rate (%)
Number of Brunei residents visiting Hong Kong 6,922 -13.5

Sources: Hong Kong Tourism Board, Fitch Solutions

  2017 Growth rate (%)
Number of Asian residents visiting Hong Kong 54,482,538 3.5

Sources: Hong Kong Tourism Board, Hong Kong Immigration Department, Fitch Solutions
Date last reviewed: June 13, 2019

 

Commercial Presence in Hong Kong

  2016 Growth rate (%)
Number of Brunei companies in Hong Kong N/A N/A
- Regional headquarters
- Regional offices
- Local offices

 

Treaties and Agreements between Hong Kong and Brunei

Brunei has a comprehensive double taxation agreement with Hong Kong that entered into force in December 2010.

Source: Hong Kong Department of Justice

 

Chamber of Commerce (or Related Organisations) in Hong Kong

Consulate General of Brunei Darussalam in Hong Kong, People's Republic of China

Address: Room 05-07, 24/F, Tower 2, Lippo Centre, 89 Queensway, Admiralty, Hong Kong

Email: hongkong.china@mfa.gov.bn

Tel: (852) 2592 3900 / 2592 3917 / 2592 3918

Fax: (852) 2522 3715

Source: Consulate General of Brunei Darussalam in Hong Kong, People's Republic of China

 

Visa Requirements for Hong Kong Residents

Hong Kong residents do not need a visa to travel to Brunei for a period of up to 14 days.

Source: Hong Kong Immigration Department

Date last reviewed: June 13, 2019

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