Brunei has taken bold steps into the world economy after the first quarter, which began April 1, witnessed a 3.6% contraction of output, down $111m, against the same period in 2006. With second quarter statistics showing a rise of 0.5%, there is hope the sultanate can gather momentum in 2008.
The construction sector is expected to play a part in this growth as the industry has steadily grown by 40% since 2000. Companies continue to square up for contracts associated with anticipated and ongoing works for a $150m airport expansion, the $1.5bn Pulau Muara Besar Port and various projects at the Sungai Liang Industrial Park.
The coming year will witness the launch of Brunei's ninth national development plan, adding demand for a new wave of schools, hospitals and civic amenities to the government's standard construction budget, which is expected to be about $1bn.
At the other end of the spectrum, pressure is growing on the government to increase the supply of private land and ease the constraints on foreign ownership of property. These moves promise a shot in the arm to smaller firms involved with real estate and retail construction, presently generating just $100m annually.
Trade is set to play a central role in any hoped-for growth. The summer saw the signing of a landmark bilateral treaty that liberalised trade with Japan - already $2bn - Brunei's largest supplier of automobiles and leading customer for liquefied natural gas. Regarding the region's second powerhouse, China, officials from both countries have been eyeing opportunities, touting an ambitious figure of $1bn worth of annual bilateral trade by 2010, up from $325m in 2006.
The signing of the Association of Southeast Asian Nations (ASEAN) charter commits Brunei to the principles of an ASEAN free trade zone by 2015. The charter is expected to remove protection for uncompetitive local firms, while opening the lucrative markets of the association, including Singapore and Malaysia, to Bruneian exports.
Brunei has become an attractive business partner further afield as well. Recent inroads into the sultanate by telecommunications giant, Ericsson, were heralded by the Swedish ambassador as "a major breakthrough in bilateral trade between the two countries". Meanwhile, Pakistani officials announced their intentions for closer ties, saying, "Brunei has a very sound base for providing joint ventures in livestock, dairy development, halal meat and pharmaceuticals."
This sound base for diversification is also being developed within Brunei. Foremost in this effort are blueprints for expansion of the tourism and finance sector. The Heart of Borneo project saw Brunei committing to preserving 220,000 square kilometres of rainforest, which the government hopes it can parlay into being a premium destination for eco- and adventure tourism which saw a boost when the sultanate recently recorded 1m annual visitors.
In finance, there was similar cause for satisfaction, with figures showing that 2007 brought $5.2m in registration and licensing fees into Brunei's offshore finance facility. Building on this, Brunei hopes to expand into the growing niche of Islamic finance. A On the heels of a 2006 merger, Bank Islam Brunei Darussalam now controls a significant share of the domestic market, and it is hoped that this, alongside Brunei's Muslim credentials, will provide a platform into overseas markets.
A major economic project is the methanol plant of Brunei Methanol Company. Construction is presently underway at the Sungai Liang industrial park, with a 2010 start-up anticipated. The joint venture with Japan's Mitsubishi and ITOCHU corporations, priced at $400m, continues to lead the way in Bruneian operations downstream of oil, with aluminium smelting and fertiliser production still further down the pipeline.
It is this overall diversification that remains central to the sultanate's economy. While oil provides over 90% of the government's export earnings, the country recognises the need to wean itself from its dependence on these revenues. Speculation continues over whether the country's hydrocarbon reserves will last two or four decades, with output now around 200,000 barrels daily. Technology advances have boosted this figure. The French company, Total, now drills to 6000m in waters off Brunei, and progress has been seen in the science of extracting residual oil from wells that had been considered depleted.
Endeavouring to stem this dependency, the government has greatly increased its focus on small enterprises. In his annual birthday address, the Sultan and Yang Di-Pertuan of Brunei Darussalam urged that, "all parties must appreciate the contributions of small-medium enterprises and work together to tackle problems they face." In keeping with this, a 2007-2008 budget allocates BN$138m ($97m) to programmes supporting small businesses.
Despite this, political stability and prosperity, key to the sultanate's billing as a safe investment, have also served to stymie grassroots capitalism, with local media bemoaning a culture of 'complacency'. The coming year is expected to see the sultanate's first significant tax regime and streamlining of the country's generous civil service, by far the nation's biggest employer. Time will tell whether these measures will spur the more innovative culture Brunei aspires to.