Brunei's challenge is to shed dependency on oil & gas: Report

2008-02-29

By Azlan Othman

The slow progress of the private sector, lack of transparency and public accountability and modest economic growth insufficient to generate enough jobs for the growing labour force were highlighted at the recent World Trade Organisation (WTO) Secretariat report on trade policies and practices in Brunei.

It said the country owes its prosperity to its abundant oil and gas resources. This leaves Brunei vulnerable to external shocks, particularly given the prospect of an eventual depletion of these resources.

The report stated that the major challenge for Brunei is to create sustained growth in the non-oil private sector while reducing the role of the government, as well as intensify the economic diversification programme.

Despite the provision of investment incentives, the private sector in Brunei remains small and weak, it added.

It also highlighted that foreign investment policies, while encouraging investment in all sectors, are unclear about limits on foreign equity holdings and the sectors in which investment is restricted, thereby providing scope for discretion in government decision making.

The report also said Brunei has made significant improvements to its regulatory framework in several trade areas notably trade related aspects of intellectual property rights (TRIPS), customs procedures, telecommunications and standards since the previous review.

Brunei has intensified its participation in regional trade agreements and has reduced tariffs to low levels although there is still a large gap between applied and bound Most Favoured Nation (MFN) rates.

With respect to trade and investment policy framework, the report also noted a number of changes and revisions, partly relating to the WTO provisions, which have been made to national laws, with respect to intellectual property rights, customs and excise and the recent regional and bilateral agreements and investment, including FDI.

However, it highlighted the lack of data in several key areas and activities which continue to be an impediment to both the formulation and effective evaluation of trade and trade-related policies and measures.

The report also noted that Brunei has intensified its participation in regional and bilateral trade agreements in Asean, BIMP-EAGA and Apec.

In Asean, Brunei has reduced tariffs on 93 per cent of tariff lines to five per cent or zero for products of Asean origin.

Brunei has also increased activity on the bilateral front such as signing trade and investment framework agreement (TIFA) between Brunei and United States in 2002, Brunei-Japan economic partnership agreement in 2007.

On trade policies and practices, the report stated that Brunei is committed to applying MFN treatment to products coming from all the WTO members. Brunei's applied MFN tariffs are low, averaging 4.8 per cent in 2007, zero for agriculture and 5.4 per cent for non-agricultural products, ranging from 0 to 30 per cent.

Almost 99 per cent of tariffs are subject to 'ad valorem' (according to value) rates, while 131 carry specific rates of duty, which apply mainly to matches, cigarettes, coffee, tea and oil and lubricants.

Brunei has continued to reduce its already low tariff rates under Asean, as well as more recent preferential agreements, although imports of a few products are still subject to non-tariff restrictions, the report added.