Economic Update

Recent weeks have seen the Sultanate take some important steps in boosting trade ties with both regional friends and more distant allies. This recent flurry of international links will be good for Brunei Darussalam’s trade position, and may also stand the Sultanate in good stead as it prepares to chair the Association of South-east Asian Nations (ASEAN) in 2013.

Indeed, it was fellow ASEAN member Vietnam that dominated the news flow last month. On February 7, Sultan Hassanal Bolkiah received Vietnam’s foreign minister, Pham Binh Minh, on an official visit to Brunei Darussalam.

The Sultan announced he was in favour of the two nations making greater efforts to enhance bilateral cooperation and increase trade and said that Brunei Darussalam would begin directly importing Vietnamese rice into the Sultanate, for which a memorandum of understanding (MoU) would be signed in the near future. It was also announced an agreement on investment promotion and protection had been reached.

At the same time, it seems Vietnam is just as eager to pursue closer ties with the Sultanate. Vietnam’s ambassador to the Sultanate, Pham Binh Man, told the local Borneo Bulletin that Vietnam was “prepared to cooperate closely with and truly support Brunei”.

Economic relations between the Sultanate and the Socialist Republic should be enhanced greatly by the MoU and the investment agreement, which is currently being drafted.

In a February 8 interview with local media, ambassador Man explained that the proposed agreement – called the “Protection and Promotion of Foreign Direct Investments” – would also help expedite foreign investments in both countries by protecting foreign investors.

The new arrangements should add energy to an already vibrant trade partnership. The Sultanate’s trade with Vietnam, which is made up mostly of consumer goods and food, increased 10-fold from 2010 to 2011, reaching $200m at the end of last year

This is potentially a very lucrative relationship for Vietnam, as Brunei Darussalam imports nearly 90% of its total food requirements and nearly all of its manufactured products. In 2010, for example, 33.5% of the Sultanate’s imports came from Singapore, 19.9% from Malaysia and 13% from China. Though its trade with the Sultanate may not reach these levels, Vietnam will be looking to enhance its share considerably in the years ahead.

Indeed, the country, which is just beginning to grow its nascent oil and gas sector, is already relying on Brunei Darussalam to train oil and gas specialists under an existing MoU.

Also keen to enhance ties with Brunei Darussalam is a more distant partner, yet one nonetheless of great significance in Asia Pacific: Russia. In late January, Russia’s foreign minister, Sergey Lavrov, addressed plans for cooperation between the two nations at the Universiti Brunei Darussalam during a speech on Russian foreign policy.

“For many years, Russia has had very good relations with Brunei,” Lavrov said. “The two countries are cooperating very closely – both in politics and in other spheres. For example, intensive talks are now being held between the two countries’ energy ministries.”

In addition, Russian gas giant Gazprom is discussing possible contracts with Brunei Petroleum, according to Lavrov, who added that the two countries are also looking at possible joint projects in other countries. “I believe much may be done here if we join our potentials,” he said.

Even further afield, Brunei Darussalam has signed a number of documents, including two MoUs with Qatar, following a January 18 visit by the Qatari emir, Sheikh Bin Khalifa Al Thani, and a bilateral meeting held at the Sultan’s palace. The MoUs addressed cultural and educational cooperation between the two countries. In addition, the two nations signed agreements regarding taxation schemes and economic and technical cooperation.

After the signing ceremony, the Sultan said that he believed many areas remained in which Brunei Darussalam and Qatar could expand their cooperation and noted that agreements with other countries could also prove similarly fruitful.

“It is good to see that our bilateral relations are beginning to take on a new and more substantive form,” the Sultan said.

Indeed, making its bilateral relations more substantial seems to be the general theme in Brunei Darussalam’s diplomatic and trade affairs of late. In making such moves in the months running up to its chairing of ASEAN, the Sultanate can only be solidifying its position in the region – and on the global stage.