Dependence on the oil and gas sector, which accounts for most of Brunei Darussalam’s GDP, exports and government revenues, has allowed the country to reach the high-income level but leaves it highly vulnerable to energy price fluctuations.
The challenging business environment may discourage investment in non-energy sectors. For example, starting and running businesses, registering property, inadequate physical infrastructure and weak intellectual property protection pose difficulties. New measures are underway to attract investment by promoting R&D and ICT use. The Brunei Research Incentive Scheme (BRISc) is a cost-sharing grant program where 70% of R&D funding can be obtained from the government. The government has also upgraded ICT infrastructure with fiber-to-the-home (FTTH) broadband services.
Private sector development:
A stronger private sector in general would promote the economic diversification process, and several services sectors stand out as potential areas of growth. These include financial and business services, tourism, Halal products, logistics, ICT and oil and gas downstream activities. Apart from identifying the specific sectors to be promoted, the main challenge will be to come up with effective execution plans to realize desired objectives.
Public finance:
The country’s public finances are enviable in many respects as the government has high revenues, large surpluses, low debt relative to GDP, large gross national savings and large fiscal buffers. However almost 90% of total revenue is received from the oil and gas sector. Brunei Darussalam should ensure the large annual budget surpluses are invested productively, perhaps in education to help diversify the economy and to increase potential output. Greater use of PPPs could increase spending efficiency and contribute to the development of various sectors, including construction, business services and financial services.