It’s been nine years since the announcement of the Wawasan Brunei 2035 targets to revitalise and overhaul Brunei and its economy. Good progress has been made on getting the key policies in place but the next phase of development means the government and citizens must face a whole new world.
By Oliver Ward
The launch of Wawasan Brunei 2035 (or Brunei Vision) over a decade ago sought to target three main areas. It called for a dynamic and sustainable economy, education reforms to create a highly skilled workforce and raising the standard of living across the country.
Behind these big plans, the government outlined goals for the total reformation of the education system, economic policy, business development, social security and welfare systems, as well as environmental policy. So, to what extent have these reforms managed to achieve Hassanal Bolkiah’s vision for 2035?
Historically, Brunei’s economy relied heavily on the production of crude oil and natural gas, so part of the Wawasan Brunei 2035 goal was to reduce this dependence. Instead, it looked to diversifying the economy by reforming regulations and attract foreign investment.
In this context, the 2015 slump in global oil prices – and the continued glut in 2016 – is an excellent opportunity to assess the extent at which Brunei has achieved this. So far, the nation has managed to cushion the worst effects, despite relying on oil and gas for over 92% of their total exports.
Fast track to success
The Brunei Economic Development Board (BEDB) has been key in this, offering foreign investors a fast track system for obtaining permits, licenses and approvals. The Sultanate has also offered tax incentives, such as a five-year tax exemption from corporation tax for non-oil industries such as agribusiness, construction, consumer goods, environmental technologies, transportation, the media and education. Also relevant is the decision to create the first sharia state in Southeast Asia, making Brunei a magnet for foreign investment from Islamic countries who uphold sharia law.
Offering these glittering incentives for foreign investment, and investing public finances in domestically-produced products, has increased Brunei’s international recognition as an investment destination. Trade links with China are strengthening, Hengyi is currently building a refinery in Puala Muara Basar, and 2016 has seen the announcement of three new joint projects expected to generate $500 million of joint Brunei-Chinese investment.
The project has also prepared citizens for change. The private sector was tipped to become a larger employment source to prompt national growth while, for their part, the government pledged to make it easier to conduct business in Brunei.
The signals are that this transition has been successful, supported by the government holding up its side of the arrangement. In the World Bank’s 2016 report ranking nations by the ease of conducting business, Brunei’s place rose 21 places to 84th in the world. It also achieved the score of 74th best place to start a business. This is a significant increase as, in 2015, it was the 181st. Corporation tax was also cut to 18.5% last year, giving it the second lowest rate in the ASEAN region.
Reforming the system
By streamlining the online business registration process, and introducing government start-up schemes, the government has promoted a business-friendly environment. As one good indicator, online company registration was up by 20% between 2014 and 2015 and continues to rise this year. Other recent developments include preparations for the launch of Brunei Darussalam’s stock market. This should strengthen the financial services industry and “act as a serious catalyst for economic growth.”
With the Wawasan Brunei 2035 goals in mind, the government also embarked on education reform designed to address the requirements of modern industry. During the first stage of the plan, the government achieved all four of its leading educational targets and more than 80% of school teachers now hold First Class Honours degrees. Also, schools now have a computer for every ten students and all students complete a minimum of nine years of mandatory education.
The second phase of the vision is currently underway and finishes in 2017. This period focuses on implementing more modern teaching practices and ensuring a holistic education, including more technological and ICT training. This should go some way to reducing dependency on foreign technology workers in Brunei’s oil industry.
But beside these economic implications, the comprehensive structural shift in Brunei’s economy and education systems has the potential to cause widespread disruption and change. The country does not have a democratically-elected government, and the Sultan administrates by working with a close circle of advisers based out of his own office.
In the current climate, he enjoys popularity because the country’s oil money keeps the standard of living high and allows the government to provide healthcare and jobs without the introduction of income tax. However, the shift away from a fossil-fuel based economy will make it almost impossible for the government to sustain this standard of living.
A move away from the usual
As the economy diversifies and financial services, tourism and manufacturing industries grow, income tax will almost certainly need to be introduced to maintain the policies and benefits the population expects. When this moment arrives, people may not be so willing to pay to an unelected and unaccountable government. This could be crucial for – as we have seen across the Middle East – when institutional structures are unable to meet political demands a country can quickly become a hotbed for rebellion and unrest.
The government has already urged citizens to change their lifestyles and preserve energy, saying they must prepare for a future without oil and gas reserves. As such, it would seem policymakers already knows what may be ahead for Brunei – and the uncertainty that could come with it – so are looking to prolong the current situation for as long as possible.
To get back to today, the 2035 vision’s target numbers are on the way to being fully realised. Brunei has diversified its economy and attracted significant foreign investment at a time when falling oil prices meant failure to do so could have been costly. And at the same time, education reforms are creating a workforce better placed to take jobs in the natural gas and technology sectors, reducing Brunei’s dependency on foreign labour in the future.
However, if the plan is successful then its very goal – of the diversification of Brunei’s economy – could change the political relationship between the government and citizens. The leadership will not only need to find new ways of generating revenue but could face a level of scrutiny they have never seen before.