Brunei Darussalam: Industrial Stimulus

The Oxford Business Group on 2nd April 2010 reported the following:

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Brunei Darussalam: Industrial Stimulus

2 April 2010

One of Brunei Darussalam's largest industrial projects to date is set to commence operations in April, with officials hoping the investment of $450m in the showcase methanol production facility will act as a springboard to new industries.

In late February, the Brunei Methanol Company (BMC) issued a statement saying its production centre at the Sungai Liang Industrial Park (SPARK), a 271-ha hub that focuses on the petrochemicals sector being developed by the Brunei Economic Development Board (BEDB), was scheduled to go on-line within two months, ramping up towards its full capacity of 850,000 tonnes of methanol annually.

BMC, a joint venture between Brunei National Petroleum Company, Japan's Mitsubishi Gas Chemical Company and the Itochu Corporation, was established in late-2005 to capitalise on the Sultanate's significant stocks of natural gas.

While all of the plant's output is at present intended for export, with Japan being one of the main markets, BMC's product is also seen as crucial to Brunei Darussalam's wider plans for industrialisation.

Methanol, a chemical compound manufactured from methane, which is the main component of natural gas, has numerous industrial applications, including in the production of plastics; various chemicals such as formaldehyde and solvents; paints; as well as being used in the processing of wood to make plywood. All of these have been identified as products of industries that could be promoted in the Sultanate.

The company itself acknowledges the pathfinding role it has in Brunei Darussalam's industrial evolution. "After achieving full commercial operation in less than two months' time, BMC will be the flagship for further economic diversification and industrialisation of Brunei Darussalam and the beacon for attracting further foreign direct investment (FDI) to the country," the company said in a statement issued on February 21.

Another cornerstone of Brunei Darussalam's industrialisation policy is Pulau Muara Besar (PMB), an integrated development comprising a container port and manufacturing centre. Located in Brunei Bay, and close to the country's principal port, the BEDB is aiming to attract large-scale local and overseas investments to PMB, with the plans including the construction of an aluminium smelter and an industrial zone to house processing facilities for halal foods destined for the export market.

More than 800 ha of land have been set aside at the PMB site for the export processing zone. The area will be dedicated to manufacturing as part of a campaign to build industrial capacity and increase the flow of FDI into the country. In particular, the government and its agencies are trying to channel potential capital inflow away from the traditional area of the hydrocarbons sector and towards other industrial projects.

Though it would take time, by providing investment opportunities to the petrochemical industry at SPARK and to the manufacturing sector at PMB, Dato Paduka Timothy Ong, the BEDB's acting chairman, said he is confident Brunei Darussalam will be more successful in attracting investments outside of the upstream oil industry in the coming years.

While assuming that interest in the country's industrial potential would increase in the future, Dato Ong told local media in an interview in late November that Brunei Darussalam had to ensure that it was in a position to absorb FDI. If the required infrastructure was not in place or there were delays, investors could look elsewhere, he said.

"If there are investors wanting to come in but we are slow in terms of coming up with the suitable sites and power connections, that would be an example of a present interest but lack of capacity," said Dato Ong.

In order to help turn the wheels of industry and avoid one of the problems referred to by Dato Ong, Brunei Darussalam announced in mid-February it will begin buying electricity from Sarawak by 2012, with one of the proposed routes for the 40-km line running directly from Miri in northern Sarawak to SPARK.

By sourcing electricity from Sarawak, Brunei Darussalam will also free up some of its own natural gas for sale overseas or for its own industrial projects. With Sarawak's hydroelectric power coming at a much cheaper cost than the price Brunei Darussalam can earn selling its gas overseas, both the manufacturing and hydrocarbon sectors look set to profit from the deal.

Though Brunei Darussalam has stiff competition in the region in the race to attract overseas investments, with many of its neighbours having long since developed a solid manufacturing base, the Sultanate does enjoy some distinct advantages, mainly a plentiful supply of gas to provide feedstock for petrochemical industries and the infrastructure to support such projects. Now it has to translate these advantages into FDI.

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