2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report

Openness to, and Restrictions Upon, Foreign Investment

The Government of Brunei continues its economic diversification efforts, seeking to move away from its long reliance on oil and gas exports. Brunei encourages foreign investment in the domestic economy through various investment incentives offered by the Brunei Economic Development Board (BEDB) and the Ministry of Industry and Primary Resources (MIPR) and through activities by the Ministry of Foreign Affairs and Trade (MOFAT), which offers favorable incentives for foreign direct investments and trade.

Set up in 2001, BEDB is the major economic development agency in Brunei, marketing Brunei as an opportunity for investors in new industries and economic activities. BEDB focuses on four key growth areas: attracting direct foreign investments; strengthening local businesses; increasing research and development (R&D) and innovation; and delivering infrastructure projects. BEDB offers investment opportunities in a number of industrial areas, including the Sungai Liang Industrial Park for petrochemical industries; the deepwater port of Pulau Muara Besar for oil refinery and storage capabilities; the iCenter for info-communication technology; the Rimba Digital Junction for data center development activities; the Lambak Kanan East Industrial Park for LED light assembly and oil country tubular goods; and the Bukit Panggal Industrial Park for cable manufacturing.

MIPR is responsible for promoting and facilitating industrial development in Brunei mainly in the manufacturing, tourism, agriculture, fisheries, and forestry sectors. MIPR has achieved a steady flow of investments from within Brunei, ASEAN and other countries and facilitates business development at the national level by providing land for business operations.

MOFAT promotes trade and foreign investment through intergovernmental negotiations of trade agreements, investment incentives, reduced corporate tax rates and inclusion of the provision of pioneer status – a special tax exempt status for specific technical, financial or business management service and investment companies unavailable in Brunei and considered in the public interest. MOFAT participates in government to government discussion on trade barriers and provides recommendations for tariff imposition on foreign goods and services. MOFAT coordinates with BEDB in facilitating trade missions abroad.

Brunei ranked 83rd out of 183 countries in the World Bank’s "Ease of Doing Business" 2012.

Brunei offers generous tax incentives to foreign investors, with the production of foreign goods and services benefiting from indefinite tax breaks. The Investment Incentives Order 2001 provides guidelines for granting pioneer status and tax relief for foreign and local investment. Brunei was ranked 22nd out of 185 economies in the International Finance Corporation’s “Paying Taxes 2012” report. According to the report, Brunei is one of the six high-income economies that lowered the tax burden to companies by 2% in the 2011/2012 period.

Regulations relating to foreign participation in equity are flexible. In many instances there can be 100 percent foreign ownership, except for sectors involving natural resources and national food security, where FDI is capped at 70 percent equity.

Foreign firms need a local partner to purchase land. Since July 2009, the Strata Title Act allows non-citizens to “own” property, with the terms of a 99 year lease, but only for certain kinds of properties, such as townhomes and those that are more than two stories high. Foreign firms can apply for a long term lease, which must be approved by the Prime Minister’s Office.

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Measure

Year

Index/Ranking

TI Corruption Index

2011

5.2 / 44 of 183

World Bank Doing Business

2012

83

Conversion and Transfer Policies

There are no foreign exchange controls, but exchanges are monitored. Banks permit non-resident accounts. There is no restriction on borrowing by non-residents.

Since January 1, 2011 Autoriti Monetari Brunei Darussalam (AMBD) has performed many central bank functions including formulating and implementing monetary policies, regulating and supervising financial institutions and managing currency. The Brunei Dollar is pegged at par to the Singapore Dollar and through the Currency Interchangeability Agreement the currencies can be used in both countries.

Expropriation and Compensation

There is no history of expropriation in Brunei.

Dispute Settlement

Brunei signed the U.N.-sponsored Convention on the Settlement of Investment Disputes in 2002. At the regional level, Brunei Darussalam is a member of the ASEAN Protocol on Enhanced Dispute Settlement Mechanism (2004), and the Agreement among the Government of Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, and Thailand for the Promotion and Protection of Investment, 1987. The former regulates settlement of disputes on economic agreements between ASEAN Members and the latter provides for the promotion and protection of investments, which includes settlement of related disputes. The International Arbitration Order was enacted in 2009, but has yet to be ratified and legally enforced. The court system is generally transparent and fair.

In 2005, Brunei signed the Trans-Pacific Strategic Economic Partnership Agreement with Chile, New Zealand and Singapore. The Agreement encourages the expansion and diversification of trade among the participating countries by eliminating trade barriers, increasing investment opportunities, and protecting intellectual property rights. The Agreement provides an effective, efficient and transparent process for consultations and dispute settlements. Brunei is a party to the ongoing Trans-Pacific Partnership (TPP) negotiations.

Performance Requirements and Incentives

Companies producing goods and services for export can apply for a renewable 10-year tax exemption. Corporate tax relief of up to 5 years is available for companies that invest between B$500,000 to B$2.5 million (USD385,000 to USD1.9million) and up to 8 years for amounts exceeding B$2.5million (USD1.9 million) in approved ventures. An 11-year tax break is offered if the venture is located in a high-tech industrial park. Businesses wishing to compete in domestic markets can qualify for tax breaks for up to eight years. Sole proprietorships and partnerships are not subject to tax. Individuals do not pay any capital gains tax and profits arising from the sale of capital assets are not taxable. Brunei has double-taxation agreements with Britain, Indonesia, China, Singapore, Vietnam, Bahrain, Oman, Japan, and Pakistan. Tax on petroleum operations is codified in the 1960 Income Tax enactment, which is similar to tax policies in other oil-producing nations.

A Project Performance Bond is required at the tender approval stage to guarantee the delivery of a project in accordance with the project specifications. The bond is returned to the company involved at successful project completion.

Right to Private Ownership and Establishment

All businesses in Brunei must be registered with the Registrar of Companies within the Attorney General’s Chambers. Except for sole proprietorships, foreign investors can fully own incorporated companies, foreign company branches or representative offices. Partnerships generally require the participation of citizens. Foreign direct investments by multi-national corporations may not require local partnership in setting up a subsidiary of their parent company in Brunei. However, at least one company director must be a Brunei citizen or permanent resident in Brunei Darussalam. A multinational company with an operating plant on an MIPR industrial park is required to have 30% of the companies’ board represented by Brunei citizens and permanent residents.

Protection of Property Rights

Trademarks can be registered with relative ease under the Brunei Trademarks Act. Once registered, trademarks last ten years and are renewable for ten more years. Enforcement requires direct copyright holder action.

Brunei’s Intellectual Property Rights (IPR) law is consistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The law is complaint based. The right holder must appeal / take action with the government, which then begins enforcement actions. The Bruneian government has made concerted efforts to remove pirated music from stores and prosecuted a local business owner for infringing the Patents Order 2011.

Under the Emergency Order (Copyright) 1999, Section 204, anyone caught infringing copyright, selling, smuggling, or distributing goods, except for personal use and domestic purposes, is liable to be fined, imprisoned for a period not to exceed two years, or both. However, pirated and fake goods originating in neighboring countries are widely sold due to a perceived lack of right holder’s complaints. Music piracy has been significantly reduced, but movie and software entertainment piracy is still rampant.

Brunei Darussalam is a full member of the Paris Convention, the Berne Convention, the WTO-TRIPS and the World Intellectual Property Organization (WIPO). It has also signed the ASEAN Framework Agreement on Intellectual Property Cooperation.

In accordance with the 2011 Patents Order, the Brunei Government opened its Patent Registry Office on January 2, 2012. The office has already begun processing applications. The Order established a new Registry of Patents for receiving, processing and granting patents and facilitates the international filing of patents. As part of the ongoing restructuring of the Intellectual Property (IP) administrative system, the Patent Registry Office of the BEDB absorbed the Registry of Industrial Designs. BEDB also is responsible for establishing a National Intellectual Property Office responsible for the registration of patents, industrial designs, plant variety protection and trademarks.

Transparency of the Regulatory System

Brunei has a transparent regulatory system.

Competition from State Owned Enterprises

Semaun Holdings, incorporated as a private limited company, is wholly owned by the Brunei Government. Its emphasis is on joint ventures with foreign investors, mainly in aquaculture, food processing, glass crystal, and hi-tech manufacturing industries which are currently not open for 100% foreign ownership.

Under the Telecommunications Order 2001, the Authority for Info-communications Technology Industry (AiTi) regulates the licensing of the telecommunications industry. The establishment, installation, maintenance, provision or operation of unlicensed telecommunication systems or services within Brunei is a punishable offence, resulting in imprisonment, and large fines. AiTi has not opened up the telecommunications industry for foreign participation. The telecommunications industry is dominated by Telekom Brunei (TelBru) and Data Stream Technologies (DST) Communications, both privatized state companies. Telbru is the sole provider of fixed lines. Its subsidiary company, B-mobile, provides 3G mobile services together with DST. DST is also the sole provider of Global Systems for Mobile communication (GSM) mobile phone service and the sole pay-television service provider.

The Brunei Investment Agency (BIA) manages the Government of Brunei's General Reserve Fund, and their external assets. Established in 1983, its assets are reportedly worth USD$30 billion. It has holdings in corporations, real estate, and currencies. BIA’s activities are not publicly disclosed. It is ranked the lowest in transparency ratings by The Sovereign Wealth Fund Institute.

The Royal Brunei Technical Services (RBTS), established in 1988 as a wholly-government owned corporation, is responsible for managing the acquisition of a wide range of systems and equipment and maintaining those acquired systems and equipment.

Brunei National Petroleum Sendirian Berhad (PB) is the national oil company. PB is wholly owned by the Brunei Government and was incorporated on January 14, 2001 as a private limited company. The company was granted all the mineral rights in eight prime onshore and offshore petroleum blocks comprised of the deepwater offshore Blocks CA1 & CA2, inboard offshore Blocks N, P, Q, & B and onshore Blocks L & M totaling 20,552 sq. km. Currently, the company manages the production sharing contractors exploring the onshore and deepwater offshore blocks. The company is also working with the Block B operator in the development of the Maharaja Lela/Jamalulam Field.

Political Violence

There have been no cases of political violence since Brunei became fully independent in 1984.

Corruption

The Anti-Corruption Bureau (ACB) strives to ensure a corruption-free public service. Corrupt practices are punishable under the Prevention of Corruption Act. The Act also applies to Brunei citizens abroad. There are perceptions that corruption in the private sector is more prevalent than the public sector, which has prompted the ACB to focus on the private sector, as the private sector plays a critical role in Brunei’s economic diversification.

In Transparency International's Corruption Perception Index (CPI) 2011, Brunei is ranked 44th out of 183 countries, and 2nd in ASEAN, with a slight improvement in its CPI points – 5.2 out of 10 – compared to its previous score of 5.5.

Bilateral Investment Agreements

Brunei is a member of the Association of Southeast Asian Nations (ASEAN), which has Free Trade Agreements (FTA) with Australia, New Zealand, China, India, and South Korea, and a Comprehensive Economic Partnership Agreement with Japan. Brunei is also a party to the Transpacific Strategic Economic Partnership Agreement. Brunei currently has Bilateral Investment Treaties with Oman, Germany, China, Korea, and Ukraine.

Labor

Brunei relies heavily on foreign labor in lower-skill and lower-paying positions, with approximately 120,000 guest workers brought in to fulfill specific contracts. Brunei citizens often prefer to work for the government, with its better benefits such as bonuses, education allowance, interest-free loans, housing allowance, and other benefits, rather than the private sector. Approximately 25% of the total Brunei citizen workforce is employed in the public sector.

Matters relating to labor conditions are covered under the Labor Act, Employment Order 2009 and Workmen’s Compensation Act.

Foreign Direct Investment Statistics

Latest statistics (mid-2011) indicate that Foreign Direct Investment (FDI) stood at USD476 million, with the largest FDI from the European Union at 75%.

Foreign Direct Investment By Country Of Origin (Unit: million USD)
Source: Source: Department of Statistics, Department of Economic Planning and Development, Prime Minister’s Office.

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Country

(2011)

(2012 1st Half)

NORTH AMERICA

28.28

12.28

United States of America

27.47

12.24

Canada

0.81

0.04

EUROPE:

1008.31

360.57

Switzerland

0.00

0.11

European Union:

1008.31

360.46

Germany

11.00

0.00

Netherlands

222.41

62.42

United Kingdom

774.90

298.04

ASIA:

131.79

78.26

China

0.00

0.00

India

0.98

0.00

Pakistan

0.00

0.00

South Korea (ROK)

0.00

0.00

Hong Kong

0.98

24.63

Taiwan (ROC)

0.16

0.11

Japan

129.67

53.52

ASEAN

69.19

12.38

Cambodia

0.00

0.00

Indonesia

0.33

0.00

Lao PDR

0.00

0.00

Malaysia

34.56

1.87

Myanmar

0.00

0.00

Philippines

0.08

0.00

Singapore

34.15

10.51

Thailand

0.00

0.00

Viet Nam

0.00

0.00

AUSTRALASIA

1.79

1.53

Australia

1.63

0.02

New Zealand

0.16

0.00

Cook Islands

0.00

1.51

CENTRAL & SOUTH AMERICA

0.00

0.00

OTHERS:

0.65

11.18

Bermuda

0.00

0.00

British Virgin Island

0.81

0.29

Cayman Island

-0.16

10.89

JOINT COUNTRIES

0.00

0.00

INTERNATIONAL ORGANISATION

0.00

0.00

TOTAL

1239.94

476.20

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