Industrial estates are considered an integral part of Brunei Darussalam’s national infrastructure, as much as housing, roads, and utilities. While this has resulted in significant government support over the past two decades, it has also meant that the sector has remained designed largely by government structures, with growth driven by activities and developments on the country’s industrial estates.
The Brunei Industrial Development Authority (BINA) had historically been the principal custodian of sector development, but the Brunei Economic Development Board (BEDB) has risen to the fore since 2001, breaking ground on a new type of industrial estates, which are engineered to serve as innovation clusters. These are expected to assist Brunei Darussalam’s economic diversification plans as part of its long-term development plan, which is known as Wawasan Brunei 2035.
A NEW CHAPTER: The design and location of these new parks have been defined with Brunei Darussalam’s emerging new industry clusters in mind. Widely dispersed across the country, they are also intended to provide more employment opportunities for Bruneians across the Sultanate, with the aid of adjacent vocational institutions, and a cascading service demand to the local economy, which should support other businesses, and especially small and medium-sized enterprises (SMEs).
The two flagship sites are the 955-ha Pulau Muara Besar (PMB) island and the Sungai Liang Industrial Park (SPARK). PMB benefits from its location adjacent to Brunei Darussalam’s main seaport at Muara and is site of the future $4bn Zhejiang Hengyi Group’s integrated refinery and aromatics cracker plant. SPARK, which covers an area of 271 ha, has become Brunei Darussalam’s downstream petrochemicals centre, and is home to the Brunei Methanol Company’s $600m plant (see overview).
CLUSTERS: Six other sites currently under development will cater to the industrial clusters highlighted in Wawasan Brunei 2035: energy, environment, health care and health services (including pharmaceuticals and medicine), information and communications technology (ICT), and food security.
The 137.2-ha Lambak Kanan East industrial estate, nearby to BSB, is already host to phase I of Canada’s Viva Pharmaceutical’s 100,000-sq-foot halal pharmaceuticals and nutraceuticals manufacturing plant, which is due to commence production and exports in 2013. The park accommodates food and beverages, pharmaceuticals, and light manufacturing industries. The BEDB expects investment from oil country tubular goods and a light assembly plant to help indirectly develop local enterprise as well.
Meanwhile, the 15-ha Rimba Digital Junction is spearheading the BEDB’s promotion of the Sultanate as a regional ICT data centre and disaster recovery silo given its low incidence of extreme weather events and natural disasters. This site has already attracted a $102m investment from a joint venture between the government and Canadian civil aviation and defence firm CAE for a multipurpose training centre. There are also plans for a national data centre for energy data depository and e-government firms as well as two 7.2-ha disaster recovery centres. The BEDB intends to initiate investment requests for proposal for the national data centre development as well as a disaster recovery centre.
In addition, the industrial parks of Telisai will accommodate mixed industries including agroprocessing;
Bukit Panggal will host energy-intensive industries, drawing on the adjacent power station; the Brunei Agrotech Park will cater to halal and agrobusinesses (see Agriculture chapter); and Anggerek Desa will accommodate a technology park. Elsewhere, BSB is expected to continue to be the financial centre, and two ecotourism sites have been identified at Tasek Merimbun and Ulu Temburong.
CLEARING THE WAY: The BEDB acts as a single point of access for investors to advance Brunei Darussalam‘s industry development. Rather than acting in isolation, however, the BEDB has carved out a niche that is complementary to BINA’s remit in terms of function and target group. While the BEDB’s functions include infrastructure development, marketing, operation and maintenance for industrial estates, along with facilitating partnerships between local firms and foreign companies, BINA focuses on providing capacity-building assistance to firms on its estates in the form of after-care services. Conducting regular visits to a tenant’s premises or manufacturing facilities, BINA supports site expansions and addresses any grievances that may arise.
Furthermore, BEDB industrial estates are a departure from BINA’s domestic-business focused designs that provide average plots sized between 0.2 ha and 2 ha. Since 2001 the BEDB has consolidated industries and infrastructure, thus attracting large-scale industrial development, including downstream petrochemicals plants (see overview).
Providing prepared industrial land with a complete infrastructure package – road access, electricity, water and telecommunications, and extending in some instances to the construction of buildings – has proven an attractive incentive for foreign investors, the BEDB’s main target group. While capacity bottlenecks have emerged for both building materials and labour as national infrastructure projects compete for the same resources, progress continues to be made at the parks. Indeed, the development of SPARK is now progressing into the next phase, whereby the as yet unfinished area of the site will be equipped with the necessary infrastructure to cater for new industrial tenants.
BINA itself covers nine industrial zones in Brunei Darussalam’s four districts, encompassing more than 400 ha, including Pekan Belait and Sungai Bera Industrial Estates, established 1992 and 1996, respectively, and adjacent to the Kuala Belait energy hub. Other notable industrial estates are located near BSB, including Beribi, Serasa, Salar, Lambak Kanan West, Kuala Lurah, Serambangun and Bato Apoi.
LAND ISSUES: Approximately 4% of Brunei Darussalam’s land is in private hands, of which less than 1% was utilised for commercial purposes in 2009. With 58% of its territory gazetted state land and 65% of the nation’s total designated as protected forest reserves, the Sultanate’s ambitions for economic diversification in the private sector must locate itself in just a small area. Accordingly, in the absence of legislative reform, industrial estates, whether under BINA or BEDB, are the critical engines of growth, expected to deliver three indirect service jobs for every one created inside the parks.
Yet perceptions of a land shortage perpetuated in Brunei Darussalam are inaccurate, according to baseline data to be published by the Centre for Strategic Policy Studies (CSPS) in 2013.
“According to our land optimisation study, assuming a higher annual growth rate of 6% over the next 30 years, Brunei Darussalam has enough land and more to house this growth without touching the Heart of Borneo. This has very positive implications for Brunei Darussalam’s economic drive, particularly industry,” Diana Cheong, head of research at CSPS, told OBG. “A national blueprint on how this land can best be allocated and utilised has been considered. In this instance, our study indicates that the private market could certainly benefit from the release of greenfield sites,” she said.
NEED FOR REFORM: A national blueprint would advance the conversion of Brunei Darussalam’s economic ambitions into reality, but impact remains low without reform of the country’s land law, which dates to 1904. The land law consists of just 34 sections, most of which has been rendered redundant by time, and no effective reform efforts have been undertaken by the Ministry of Development (MoD) since its effort to do so in 2000. This continues to restrict timely development of various economic sectors.
Lack of legislative reform has also affected foreign investors who are only afforded leaseholds of 20 to 30 years and extendable to a maximum 60 years. Such conditions are considered risky by financiers and insurers in the absence of large alternative incentives or guarantees. With the energy sector taking 77% of the BN$853m ($641.6m) foreign direct investment (FDI) in 2010, and manufacturing receiving just 5.6% of the pot, this restriction might explain Brunei Darussalam’s small onshore FDI footprint relative to the incentives and facilities it provides.
With tenants of Thailand’s industrial estates still eyeing flood-free locations and businesses in Japan moving abroad on the back of inflation, high labour costs and energy shortages, Brunei Darussalam’s industrial parks offer a competitive, attractive and politically stable alternative. Although they are largely under the radar of most investors, adequate reform and commitment to economic ambitions by the government could ultimately serve to enhance the industrial parks’ reputation as an investment destination.
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