The 2014/15 budget for Brunei Darussalam, which came into effect on April 1, has a strong business focus, seeking to promote investment, stimulate and support private sector growth, and help provide the tools and skills needed to sustain economic development and diversity.
While the budget ratified by the Legislative Council (LegCo) on March 22 maintains high levels of spending on social welfare and community development programmes, with health, housing and education among the major recipients of funding, there were also a number of provisions aimed at boosting private sector activity.
Business opportunities from development plan
When tabling the draft budget on March 10, Haji Abdul Rahman Haji Ibrahim, the second minister of finance, told the LegCo the focus was enhancing education and training; stimulating investment and private sector growth; increasing economic productivity; and ensuring social welfare. The government’s theme for the forthcoming fiscal year was “generating economic growth, establishing job opportunities”, he said, underscoring the document’s business-friendly emphasis.
The budget is intended to assist the private sector in maintaining the momentum it had in 2013, when it expanded by 3.8%, above the 3.2% growth in the public sector, Haji Abdul Rahman said. Among the leading non-oil contributors to economy last year were business services, retail, construction and finance.
In total, the budget set out spending of BN$5.98bn ($4.68bn) for the year, up 10.1% from 2013/14. With projected revenue of BN$6.6bn ($5.2bn), Brunei Darussalam is expected to see a modest surplus, in part driven by higher energy earnings, as well as private sector growth and consumption.
Around BN$1.15bn ($900.3m) of the budget’s spending will be allocated as part of the 10th National Development Plan, channelled towards projects across the utilities, transportation, communication, industrial and trade sectors. The private sector is expected to be one of the major beneficiaries of these investments, both as an end-user of improved services and through the opportunity to bid for government contracts related to the range of projects being rolled out.
Increased spending on technology, vocational education, and research and development will also likely have a positive effect on businesses.
Incentives for growth and investment
There were other inducements in the budget for companies, with the announcement that the corporate tax rate would be reduced from 20% to 18.5% by 2015, a move aimed at bolstering investment and making the economy more competitive. Other incentives for the corporate sector include the lowering of taxes on profits below $250,000 and changes to the requirements for bank guarantees or performance bonds for construction or service contracts.
Raising the country’s investment appeal was also a keystone in the budget, with Haji Abdul Rahman telling representatives of the LegCo that promoting business and investment activities was a priority for the government as it sought to reduce the economy’s dependence on hydrocarbons. “Efforts will be intensified to attract foreign and domestic investment to spur economic growth as it will have a positive social impact, particularly in creating job opportunities for local youth,” he said during his budget address on March 11.
Through programmes such as the Strategic Development Capital Fund, a government trust fund that provides equity financing for local development projects, the country is willing to share risk with foreign investors, Haji Abdul Rahman said.
It will take time for some of the benefits contained within the budget to be fully felt by the business community, such as the amended tax provisions and the projected improvements in utilities and services. Other provisions, such as higher development spending, will have a more immediate impact as funds flow into the economy.