Brunei : Brunei Country Forecast Brunei

The country (Brunei) is situated in Southeastern Asia, bordering the South China Sea and Malaysia.
Brunei has borders with Malaysia for 381km.
Land in Brunei is flat coastal plain rises to mountains in east; hilly lowland in west. Bruneian land covers an area of 5770 km².

The climate is tropical, hot, humid, rainy.Bruneian(s) speak Malay (official), English, Chinese.

Outlook for 2012-13 

Brunei's political scene is expected to remain dormant throughout the estimate period, as the sultan retains autocratic control and as fairly rapid economic increase continues to keep the people quiescent. Democratic reform appears to have been placed on the back burner. High world oil and gas prices will support the budget surplus, and the current account will record further large surpluses. A number of large projects will continue in Brunei's industrial park, supporting the sultanate's long-term economic prospects.

The political scene

Brunei remains politically dormant. There have been no significant domestic developments in recent months, although the upcoming National Day celebrations and the now annual conference of the Legislative Council in March should provide a brief glimpse into the sultanate's politics. Brunei has fined nine Vietnamese fishermen for illegally operating in its waters.

Economic policy

Brunei recorded a large budget surplus in fiscal year 2010/11 (April-March) as world commodity prices supported revenue collection. The sultanate's fiscal data are highly opaque, with large, poorly defined categories of spending accounting for much of the budget. Brunei has begun accepting applications for patents after having established its own patent office this year, although there is considerable doubt about the efficacy of intellectual property protection in the sultanate.

Full-year GDP data for 2010 have not from now on been published, but partial data used by the IMF show the economy to have grown by 5.5% in real terms in the first half of last year. The Economist Intelligence Unit expects real GDP to grow by an average of 1.7% a year in 2011-12, as the government continues to limit output in the oil and gas sector in a bid to conserve national energy reserves. Brunei's fiscal accounts will be underpinned by elevated oil prices in 2011. Consumer price inflation will remain modest compared with the rest of the South-east Asia region. Brunei's plans to move into downstream processing of oil received a boost recently with the news that firms based in China were considering a project to build an oil refinery and aromatics cracker plant in Brunei.

The domestic economy

The economy expanded by 2.5% year on year in the third quarter of 2011, led by steady production gains in the oil and gas sector. Construction output was strong, but agriculture remains a weak sector. Financial services posted a fall in output. Brunei's dependence on imported foodstuffs is reflected in inflation data, which show relatively strong upward pressure on prices for food and drinks. In general, however, inflation remains under control. Car sales increased by 7.1% in 2011, underpinned by strong consumer sentiment.

Foreign trade and payments

Brunei recorded a sharp rise in its trade surplus in the third quarter of 2011, assisted by high world oil and gas prices. The sultanate exports little else, although methanol shipments are rising rapidly. Imports are increasing swiftly, with vehicles and manufactured goods being the leading categories. Brunei attracts foreign direct investment inflows, but these are almost exclusively in the hydrocarbons sector, relating to oil, gas and petrochemicals production.

Brunei Overview

Strategically located at the hub of South-east Asia, north-west coast of the island of Borneo, Brunei Darussalam is a country of enviable political and economic stability where a serene and fasten social environment prevails.

Brunei Darussalam, some 600 years ago, was a powerful kingdom to reckon with, not only in terms of its political influence but as well in its commercial importance extending amount the way from Southeast Asia to East Asia.

Today, it is striving to reclaim that same glory in the world financial market while providing a tranquil abode that attracts creative people from amount over the world to live in this tropical paradise.

Achievements in the world arena that have won the Sultanate respect and admiration from the international community include the successful staging of the 20th South-east Asian (SEA) Games in 1999, hosting of the APEC 2000 Summit, ASEAN Tourism Forum in 2001 and recently, the Commonwealth Finance Ministers Conference in September 2003.

The country's political system is based on the country's written Constitution and its judicial, legal and administrative systems are modelled on those of the UK.

It has comprehensive cutting-edge legislation, administered by staunchly independent judiciary and the judicial system accommodates both domestic and international legal matters.

Outlook for 2013-14

• No change is expected in the political scene in the forecast period, with Sultan Hassanal Bolkiah Mu'izzaddin remaining in control of government.
• Only token moves will be made towards the development of party politics. The Legislative Council is mainly appointed and will continue to meet for just a few days each year.
• Brunei will be actively engaged in international affairs, as a function of its membership of the Association of South-East Asian Nations (ASEAN)-which it is chairing this year-and its links with other Islamic states.
• The Economist Intelligence Unit forecasts that real GDP growth will average 2% a year in 2013-14, slightly higher than the estimated gain of 0.9% in 2012.
• Although global oil and gas prices have come down from their record highs, they remain elevated and this will support large budget and trade surpluses in 2013-14, as energy is the primary driver of GDP growth in Brunei.
• The Brunei dollar will remain fixed at parity to the Singapore dollar.
• The currency peg, together with the government's policy of subsidising key goods and services, will help to keep a lid on inflation, which we expect to average 1.1% a year in the forecast period.

Review

• Brunei hosted the ASEAN summit in April, during which the sultan spearheaded discussion on territorial disputes in the South China Sea and took stock of the progress on the ASEAN Free-Trade Area.
• According to the government, its expenditure on overseas medical bills for citizens was steady at Br$12m (US$10m) in fiscal year 2011/12 (April-March). The authorities will try to improve local medical facilities in the long term.
• In May the US removed Brunei from its watchlist of countries with problems in intellectual property rights protection. The move will send a positive signal to American companies seeking to invest in Brunei.
• A series of minimum and maximum interest rates were announced by the Autoriti Monetari Brunei Darussalam (the central bank) in March, which will increase the long-term stability of the financial sector.
• Brunei's GDP expanded by 4% year on year in the fourth quarter of 2012, reversing the 2.3% contraction in the third quarter.
   

Brunei International Financial Centre (“BIFC”)

The Brunei International Financial Centre (BIFC) is under the Ministry of Finance and has been operational for almost 5 years, following its establishment in July 2000.

It is now gathering momentum especially in corporate banking, securities and insurance sectors.

As Brunei has the luck of being a resource-rich, affluent country, its motives in establishing a primary financial centre are thus focused on creating activity rather than generating a source of income alone. BIFC's goals include:

• • Diversifying, growing and expanding the price added financial service sector of the economy,
• • Providing a fasten, cost-effective, sensibly regulated facility, which will offer a safe harbour for significant regional and international business for corporate and private clients,
• • Providing well-qualified Bruneians with purposeful, challenging and rewarding careers at professional advantages,
• • Encouraging expatriate professionals to become established in Brunei, and to be productive both directly and by the transfer of knowledge and experience to qualified and trained Bruneians in the International Finance Sector and its supporting professions and industries,
• • Increasing returns for the hospitality, transport and amenity industries, including ceo-tourism, culminating in an holistic result for the country's economy, and
• • Encouraging national and individual self-reliance, purpose and fulfillment.

Above amount, BIFC serves as a catalyst to project Brunei Darussalam into the front ranks of regional and world financial players as a modest, but significant participant in the world economy.

To that extent, the International Financial Centre is a means to an end rather than an end in itself.

The Legislation

BIFC is well equipped with a wide range of international legislation carefully crafted to permit flexible, cost effective capabilities that are right-up-to-date.

These sensible and user-friendly laws, which are unique to Brunei Darussalam, provide for both conventional and Islamic facilities making financial business and activities additional efficient and rewarding.

There are 10 statutes currently effective which include the anti-crime Orders before mentioned, International Limited Partnerships Order, International Banking Order, Registered Agents and Trustees Licensing Order, International Trusts Order, International Business Companies Order, Mutual Funds Order, Securities Order and International Insurance and Takaful Order.

The Monev Laundering, Criminal Conduct (Recovery of Proceeds), Mutual Funds and the Securities Orders apply to both domestic and international financial business.

Products And Services Offered By BIFC

The products or services being offered are reflected in the name of the enabling statutes, i.e.

• • Registration of International Business Companies;
• • International Banking Licences;
• • International Islamic Banking Licences;
• • Trust Government;
• • Mutual Funds;
• • Securities; and
• • International Insurance Licences

International Business Companies (“IBCs”)

Incorporation of an IBC is governed by the International Business Company Order, 2000 ("IBCO"), which makes provision for tax-free corporate facilities at highly competitive cost levels.

Brunei is additional concerned with attracting a critical mass of good business than to achieve a fee-based income stream at a high cost to end-users.

IBCs may be limited by shares, limited by guarantee, limited by shares and guarantee, of limited duration, Dedicated Cell Companies, created by conversion, re-domiciled or discontinued in Brunei.

Foreign or overseas companies may register as Foreign International Companies, and as well operate tax-free. There are already additional than 2,500 IBCs registered in Brunei Darussalam.

International Limited Partnership (“ILPs”)

Under the International Limited Partnerships Order, 2000 ("ILPO"), an ILP consists of or additional general partners (of which must be a trust company or subsidiary thereof, an IBC or another ILP) and any number of limited partners.

An ILP may be formed for any lawful purpose, undertaken in or from within Brunei Darussalam or elsewhere. It does not carry on business with any persons resident in Brunei Darussalam, and prospectus provisions may apply to offers of securities.

International Banking

The International Banking Order, 2000 ("IBO") governs the provision of international banking services to nonresidents.

classes of license are available - Full International, International Investment Banking, International Islamic Banking and Restricted International Banking Licenses.

Banks may be established as separate entities by registration as an International Business Company under the IBCO or alternatively, register a branch of an established institution as a Foreign International Company, again under IBCO.

International Islamic banking business is banking business whose aims and operations do not involve any element that is not approved by the Islamic Religion and there is a requirement for the appointment of the Syari'ah Council. International banks will pay no tax, and neither will their staff, customers or products.

Three international banking licenses under the International Banking Order have been granted to Royal Bank of Canada, HSBC Investment Bank and, Sun Hung Kai International Bank [Brunei] Limited, a new subsidiary of Sun Hung Kai Securities Limited (SHKSL) in Hong Kong.

According to the IBO, International banking business includes the taking of deposits from the (non-resident) public in the form, the granting of credits, the issue of credit cards and money collections and transmissions.

But the definition is expanded to embrace foreign exchange transactions, the issue of guarantees, trade finance, development finance and sectoral credits, consumer credit, investment banking, Islamic banking business, broking and risk management services whether conducted by conventional practices or using Internet or other electronic technology and includes electronic banking.

Registered Agents And Licensed Trustees

There are now eight Registered Agents and Licensed Trust Companies registered under the Registered Agents and Licensed Trustees Order, 2000 ("RATLO").

Brunei has opted for a regulated trust and corporate regime ab initio. RATLO restricts the provision of "international business services" to companies licensed under that Order.

Amount establishment and compliance documents (including Certificates of Due Diligence) of International Business Companies (and Limited Partnerships) are filed by these licensed trustees.

International Trusts ("IT")

Brunei has very comprehensive international trust legislation, which will appeal both to private clients inclunding major corporations. For the private clients, provision is made for a lot of protection trust inclunding special trust regimes. Under this regime, it is not the beneficiary who enforces a trust but an independent Enforcer. This addresses certain tax and security issues.

For the major corporations, commercial purpose trusts may be created whereby it is not necessary to have an individual beneficiary.

Such trusts are widely used for Special Purpose Vehicles (SPV) and planning, varying from project finance to securitisation and segregation.

The legislation as well provides a additional modern definition of inquired charities. This enables charitable trusts to be established to protect the environment and historic buildings, for example.

Under the International Trusts Order, 2000 ("ITO"), an IT must be in writing, settled by a non-resident of Brunei, declared in its terms to be an international trusts (on creation or migration to Brunei), and at least trustee must be licensed under RATLO or an authorised whollyowned subsidiary of a licensee.

Generally, only non-residents may be beneficiaries when an IT is first established. The ITO is a comprehensive international trust legislation, which is being used increasingly for both Islamic and conventional planning.