A commitment to investing in more segments will set the sector on the right track

While constrained by a relatively small labour pool and limited domestic resources, Brunei Darussalam’s industrial sector is nevertheless seeking to carve out a significant niche for itself in the country’s growing economy. In order to achieve a larger role for the sector going forward, the Sultanate is focusing on some of its key strengths, such as its young and well-educated workforce, developed infrastructure and abundance of energy.

Much of the current manufacturing sector is built around energy’s downstream applications, such as petrochemicals, although the country continues to encourage growth among other light industry and knowledge-based segments, including the ICT sector and niche halal products.


With Brunei Darussalam’s economy still largely reliant on the oil and gas sector, the country’s manufacturing base remains limited, contributing just 12.35%, or BN$2.49bn ($1.95bn), to the national economy in 2013, according to the Department of Economic Planning and Development. This places the sector third in terms of GDP contribution behind mining with 51.75% (BN$10.43bn, $8.19bn) and government services with 12.5% (BN$2.53bn, $1.98bn), while the agricultural, forestry and fisheries sector made up less than 1% of GDP.

In spite of its relatively small contribution, the sector continues to expand at a stable rate even as the oil and gas sector dragged down the Sultanate’s overall economic growth in 2012 and 2013 as output declined. From 2011 to 2013 the value of Brunei Darussalam’s manufacturing sector inched upwards from BN$2.43bn ($1.91bn) to BN$2.49bn ($1.95bn).

This modest growth occurred in spite of wider declines in the industrial sector from BN$15.17bn ($11.9bn) to BN$13.76bn ($10.8bn) over the same period of time, due primarily to losses in the mining sector, including the oil and gas segment. This was particularly pronounced in the second half of the year, when the industrial sector’s year-on-year (y-o-y) growth contracted by 15.4% and 16.1% at current prices in the last two quarters, respectively. The manufacturing subsector fared slightly better with y-oy quarterly declines of 10.0% and 0.2% in the third and fourth quarters, respectively. This trend spilled over into early 2014 with another y-o-y loss of 12.8% to BN$3.38bn ($2.65bn) for the industrial sector and a decline of 7.9% to BN$520.7m ($408.59m) for manufacturing in the first quarter.


The bulk of the responsibility to implement the government’s long-term diversification strategy in the industrial sector falls to the Ministry of Industry and Primary Resources, which is responsible for the promotion, development and oversight of the various industrial and resource sectors. The Brunei Economic Development Board (BEDB) also acts to secure investment in the country, among its other duties. For the 2014/15 budgetary year, allocations for the industry and trade sector under the 10th National Development Plan totalled BN$118.4m ($92.9m) out of a total of BN$1.15bn ($902.4m) for the financial year. This represented a significant increase from the previous year, when BN$51.6m ($40.49m) out of BN$1.05bn ($823.9m) was earmarked for the sector.

In order to foster growth in the government’s targeted priority subsectors, the Brunei Industrial Development Authority (BINA) and BEDB have developed a network of dedicated industrial parks across the country, each with its own focus area. There are currently nine industrial sites located throughout the country hosting a wide variety of manufacturing, services and storage activities. One of the largest of these is the 271-ha Sungai Liang Industrial Park (SPARK), which opened its doors in 2010 in order to serve as the Sultanate’s first downstream petrochemicals production centre.

The $600m project currently houses a methanol plant with support infrastructure, including a common export jetty, steam generation facility and a water treatment plant to provide services for other possible projects, including methanol derivatives, gas-based petrochemicals and other ammonia-urea-based downstream products.

Building New Centres

Even as SPARK continues to produce, the future of heavy manufacturing in Brunei Darussalam is being built from the ground up on the island of Pulau Muara Besar (PMB), which is situated adjacent to the country’s principal port at Muara. Billed as an integrated marine supply base with a centralised facility that provides a fabrication yard, storage space, berthing facilities and deepwater accessibility, the industrial area is expected to cater to the upstream oil and gas industry in addition to downstream petrochemicals operations and energy-intensive metal smelting.

According to the master plan commissioned by the BEDB from a Singaporean consortium made up of Surbana International Consultants and Global Maritime and Port Services, basic support infrastructure includes a main roadway bisecting the island and a bridge connecting it to the mainland, which are to be completed by 2016. In addition to the 2.7-km-long bridge, a 3-km main road that connects to the approach road along Jalan Perusahann will also be built, along with utilities comprising power lines, telecoms lines, and untreated and treated water supplies from tap points on the mainland through the bridge to PMB. Additionally, in 2013 the BEDB signed a memorandum of understanding (MoU) with US-based Alcoa to explore the feasibility of a $1.8bn smelting plant on PMB.

These heavy industrial parks are further complimented by a host of sites catering to a wide array of high-tech businesses, which the government is promoting in its efforts to move towards a knowledge-based economy. Two of the most significant of these include the 137.2-ha Salambigar Industrial Park (SIP) catering to light industry, and the 15-ha Rimba Digital Junction (RDJ) set up to foster the growth of ICT and other high-tech industries. With modern transport and utility infrastructure already established in SIP, a number of food, cosmetics and pharmaceuticals companies are showing interest in the site, including Simpor Pharma, which began producing halal-certified natural health products, over-thecounter and prescription drugs in 2014 (see analysis). The second site, RDJ, will house the proposed national data centre and the $102m Multi-Purpose Training Centre, built in conjunction with Canada’s CAE, specialising in flight training and simulation and which opened in 2014.


With some of the sites now more than 20 years old, the government has tasked BINA with restructuring and refurbishing these areas as part of a wider policy and management action across the industrial sector. Other recommendations were laid out in a study of Brunei Darussalam’s industrial estates and their strengths and weaknesses, institutional governance and financial performance which was completed by UK-based consultant SQW China. The results suggested drawing up a new Industrial Authority Act to formalise BINA’s powers.

Other modifications include giving BINA a more autonomous role so it is able to act independently of larger government mechanisms to better address private sector concerns. As part of the overhaul, administrative functions will also be shifted, with BINA moving away from daily management of operations at industrial sites and more towards an oversight role, as well as post-start-up services.

In addition to upgrading the infrastructure at some of the older sites, the new restructuring plan calls for a reorganisation of more fragmented industrial sites into new, sector-specific industrial clusters. The light industry Lambak Kanan Berat Industrial Estate site, for instance, already houses significant food production facilities and will be reclassified as a food development centre, catering to the expansion of existing and new food-related operations such as halal products. The 22-ha Beribi industrial site located in the Muara District will focus on the automobile industry and will be rebranded as the Beribi Autocentre, while the newest industrial site at Kuala Lurah will be home to emerging green industries.


Complementing its industrial infrastructure, Brunei Darussalam is also seeking to attract more businesses to its industrial sites and other locations through a variety of incentives. Some of these include fiscal enticements such as tax exemptions from personal income tax, sales tax, payroll tax, capital gains tax and manufacturing tax.

Companies that are granted pioneer status are further eligible for additional benefits for a period of eight years (plus a possible extension for up to three additional years), including exemptions for corporate income tax; import duties on machinery, equipment, component parts accessories or building structures; and an exemption from import duties on raw materials. The government is looking to further sweeten the deal in the future, with the announcement in the 2014/15 national budget that the corporate tax rate would be reduced from 20% to 18.5% by 2015, as well as lowering taxes on profits below BN$250,000 ($196,175) along with changes to the requirements for bank guarantees or performance bonds for construction or service contracts. Increasing the country’s investment appeal was also a key element in the budget, with Pehin Dato Abd Rahman Ibrahim, the second minister of finance, telling representatives of the Legislative Council 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, 2014.

It will take time for some of the benefits in the budget to be fully felt by the private sector, such as the amended tax provisions and improvements in utilities and services. Other provisions, such as greater development spending, will have a more immediate impact as funds flow into the economy. Additionally, programmes such as the Strategic Development Capital Fund, a government trust fund that provides equity financing to local development projects, show that the country is willing to share risk with foreign investors, said Pehin Dato Abd Rahman Ibrahim.


By leveraging its plentiful oil and gas reserves into a stable and inexpensive source of raw materials and electricity, Brunei Darussalam has managed to attract significant international interest in its petrochemicals industry, which is primed to give the sector a significant boost in the coming years. The first successful petrochemicals firm established in the country is the Brunei Methanol Company, which operates an 850,000-tonne-per-annum (tpa) methanol plant in SPARK. A joint venture between the Brunei National Petroleum Company (25%), Japan’s Mitsubishi Gas Chemicals (50% stake) and Itochu Corporation (25% stake), the $450m facility utilises natural gas supplied by the Brunei Shell Petroleum (BSP) to produce methanol, which has been exported to Japan since 2010.

With the groundwork laid in the sector, Chinese petrochemicals giant Zhejiang Hengyi signed a land lease agreement with the BEDB in January 2014 for the purpose of constructing a new integrated oil refinery and aromatics cracker complex at the PMB industrial site. A joint venture to develop the project was later formalised in February 2014 between wholly owned Zhejiang subsidiary Hongkong Tianyi International Holding Company, which holds a 70% share in the project, and Damai Holdings, a wholly owned subsidiary of the Strategic Development Capital Fund that owns the remaining 30%.

Phase one of the project, which will produce refined petroleum and chemical products for both the domestic market and export, involves developing 150 ha of the 260-ha site, including backfilling the site to guard against flooding. The second phase of the project will overlap with the conclusion of phase one and will include the construction of a new natural-gas-fired power plant being developed by the Energy Department at the Prime Minister’s Office. The $20bn investment would serve as an anchor investment on PMB, and construction on the site is set to be completed in 2016 and the first shipments scheduled for 2017 (delayed from the original target date at the end of 2014). Output at the end of the first stage of development is expected to include 135,000 barrels per day of crude and condensates, 400,000 tpa of petrol, 1.5m tpa of diesel, 1m tpa of jet A-fuel, 1.5m tpa of naphtha cracker, 1.5m tpa of paraxylene and 500,000 tpa of benzene. The second phase will consist of expanding the refinery and adding new units capable of producing 1m tpa of paraxylene and 2m tpa of monoethylene glycol. The supply of approximately 2.75m tpa of crude oil feedstock for the project and the purchase of the refinery products from the complex will be handled by BSP, Brunei Shell Marketing and Zhejiang for a period of 15 years under a non-binding MoU. The oil will be sourced from multiple sources, two which will be in Brunei Darussalam and Qatar.

Metal Works

In addition to providing feedstock for the petrochemicals industry, Brunei Darussalam’s bountiful energy resources are also attracting interest from energy-intensive heavy industries lured by the possibility of stable, inexpensive electricity within easy shipping distance of regional markets. Most recently South Korean aluminium product manufacturer Dongyang Gangchul expressed interest in setting up shop in the Sultanate when it signed an MoU with the BEDB in June 2014 to construct a new $107m factory at the Bukit Panggal Industrial Park in Tutong. Situated on a 30-ha site, the new aluminium manufacturing plant will boast an annual capacity of 120,000 tonnes of aluminium billet casting and 48,000 tonnes of aluminium extrusion, primarily for export. The largest Bruneian-South Korean industrial project built to date, the aluminium plant will be built in three phases and is expected to employ 2000 Bruneians, as well as create opportunities for additional spin-off businesses.

The announcement followed after another MoU agreement with the BEDB that was signed in April 2014 with Chinese firm Huludao City Steel Pipe Industrial Company to build a new carbon steel factory in Brunei Darussalam. Expected to generate up to $100m in export revenues annually, the $50m carbon steel pipe factory would have an annual output of 100,000 tonnes of welded rounding carbon steel pipes upon planned start-up in 2017.


Although the industrial sector will likely be overshadowed by the oil and gas industry for the foreseeable future, ongoing efforts by the government are beginning to yield substantial results. The BEDB has managed to attract a number of major investments into the country in recent years and this should bolster Brunei Darussalam’s reputation as a business-friendly destination for large-scale heavy industrial operations and new specialised light manufacturing operations, as well as provide substantial domestic opportunities for spin-off ventures. As a result, the realisation of recent major commitments should fuel strong growth in production and exports revenue for industrial manufacturing in the years to come as projects come on-line.

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The Report: Brunei Darussalam 2014

Industry & Agriculture chapter from The Report: Brunei Darussalam 2014

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