Brunei Darussalam: Growth on Horizon
Growth on horizon
on: April 12, 2017
RIDING on the back of an Asian recovery and its own ambitious diversification strides, Brunei is poised to register an economic turnaround in the next few years if figures forecast by prominent global financial institutions are anything to go by.
The World Bank, the International Monetary Fund (IMF) and more recently the Asian Development Bank (ADB) have attributed the Sultanate’s rebound, though not massive compared to some of its Asian counterparts, to a slew of farsighted measures currently being implemented by the government.
At the core of the government’s diversification mission is opening up the economy to foreign direct investment (FDI) by slashing the corporate income tax rate to 18.5 per cent with tax exemptions for pioneer industries, allowing 100 per cent foreign ownership in domestic companies, competitively pricing land and utilities in industrial parks and establishing a special office in the Brunei Economic Development Board to fast-track foreign investment projects.
The government’s latest move is to establish a free-trade zone to attract FDIs.
Considering these reforms as highly significant, the World Bank pushed Brunei’s position in its Doing Business ranking for 2017 to 72 among 190 countries in 2017 from 97 among 189 countries in 2016.
In its May 2016 report, the IMF also expressed confidence in the resilience of Brunei’s economy which it said is expected to recover with a Gross Domestic Product (GDP) growth rate of three per cent in 2017.
However, in its Regional Economic Outlook for Asia and Pacific, the Fund noted that lower oil production and prices are projected to generate sizeable fiscal and external deficits through 2017.
But, indicating that things are going to change for the better, the ADB in its Asia Development Outlook (ADO) 2017 for Brunei Darussalam published recently said infrastructure projects and recovering oil and gas production and prices are expected to lift the GDP and inflation into positive territory and narrow the fiscal gap.
According to ADB, after many years of declining GDP, decreasing consumer prices and widening fiscal deficits, the Sultanate is poised for a mild turnaround.
GDP is expected to grow by one per cent in 2017 and rise to 2.5 per cent in 2018. Inflation is forecast to be 0.1 per cent this year and the next while the construction sector is expected to swing from contraction in 2016 to expansion in 2017, the bank said.
Acknowledging the country’s endeavours to fast-track diversification initiatives, ADB said sustainable long-term growth demands substantial reforms to the business environment to attract foreign investors to new industries, noting that much needed to be done as Brunei is still lagging behind neighbours such as Malaysia and Thailand.
Realising this, the government and its ministries have intensified efforts to unleash their full potential in diversifying the economy away from oil and gas with special focus on developing infrastructure, industry and tourism on a war footing.
As ADB noted, substantial scope exists for the government to streamline procedures and make the country’s non-hydrocarbon sectors more attractive to foreign investors, ADB said.
Courtesy of Borneo Bulletin