Brunei’s economic growth has been one of Southeast Asia’s biggest success stories. Skilled foreign labour has driven this boom.
By John Pennington, edited by Francesca Ross
The clock is ticking for Brunei Darussalam. Gas and oil exports will not sustain their wealth forever. The economy has to be pushed to diversify or it will remain in a downward spiral.
Brunei’s GDP growth rate fell by 3.6% as of January 2017 thanks to dips in economic output in all areas. The government needs to focus on recovery but is concerned by the potential of foreign workers to disrupt this and heavily regulates their labour. As much as 40% of the workforce is recruited from overseas. Penalties for foreign workers who outstay their visas or commit crimes are severe.
Foreign workers take on low-skilled, low-paid work in the private sector, including retail and service jobs. Construction is the biggest sector employing migrants. The majority of foreign recruits come from Bangladesh, India, Indonesia, the Philippines, Malaysia, and Thailand. Meanwhile, many Bruneians take on well-paid work in the public sector.
Brunei values its foreign labour force even if it is trying to regulate it
The Brunei administration does seem to understand that foreign workers will be required to keep the country moving. It does not want to force them out entirely or scare them away. Recent developments are helping companies employ people more carefully, but also more efficiently.
The Ministry of Home Affairs announced plans to speed up the processing period for obtaining working credentials. “Under this new policy process, the application will be shortened from 41 working days to nine and it will reduce the processing procedures to seven from the previous 12.” Haji Idris bin Haji Ali, Deputy Permanent Secretary at the Ministry, said.
The security deposits that employers must pay to take on foreign workers have been reduced by the authorities. Employers recruiting workers from Cambodia, Laos, Myanmar and Vietnam now pay 25% less than they did, from US$ 900 to US$ 700. Companies have extra flexibility when paying.
The country also recognises the importance of commuting workers. Malaysian Prime Minister Najib recently confirmed that the amount of checks commuters from Sabah and Sarawak have to go through on a regular basis was being reviewed.
Diversification of the economy is essential for Brunei’s future
The problem for Brunei is not in the number of foreign workers it employs. This is a symptom. The cause is economic stagnation.
Brunei is the third-largest producer of oil in Southeast Asia and the third-biggest producer of liquefied natural gas (LNG) among ASEAN nations. The country’s economy is not exclusively reliant on gas and oil-related products, but they account for 95% of exports and are vital for growth.
Oil reserves are projected to run out by 2038 and the government has worked hard to diversify the economy. Projects have been put in place to develop opportunities in agriculture, forestry, fishing, and banking, but progress has not been easy.
Brunei’s economy took a hit when global oil prices dropped and production slowed. A shrinking economy replaced a slow-growing one. The government must now get the nation moving in the right direction again. They could do so by freezing public sector wages, cutting fuel subsidies and abandoning some major public projects, said the International Monetary Fund.
The government wants more locals to take on jobs
New reforms to employment rules intended to create local growth mean companies are expected to employ locals wherever possible. Work permits for foreign workers are only issued for short periods of time and must be continually renewed.
The problem, say entrepreneurs, is that Brunei citizens are unwilling to take on low-paid, unskilled work. This is a knock-on effect of companies opting to employ foreign workers.
“We fully support locals but it is difficult to get them to come in.” said one restaurant owner. “Out of 100 local applicants, only a few will take up jobs and in the end, we would be lucky if one or two stay.” he added.
Diversification is essential, but it will take time
Brunei’s geographic and political circumstances mean it cannot diversify its economy like some of its fellow ASEAN nations. Little can be grown in a rainforest and it will never compete with the likes of Malaysia and Thailand as a holiday destination.
Lengthy contracts to supply Asian countries with LNG are helpful and plans to drill for more reserves should be carefully and strategically managed. Diversification in the long term is essential when oil reserves will not last forever.
Wawasan Brunei 2035, the vision for a drastic overhaul of Brunei’s economy and society was supposed to tackle these issues and give young people new skills. Initial education reform targets were hit and the next stage, designed specifically to reduce Brunei’s reliance on foreign workers in the oil industry, is due to finish this year.
Does Brunei have its short-term and long-term goals mixed up?
Growth in Brunei has stagnated and higher levels of local employment would go some way to kickstarting new opportunities. Overseas workers bleed money from the economy by sending their wages back home. If this money could be kept locally then it would foster new business and the wider economy.
The question of why so many foreign workers are needed could be turned on its head: Why are Bruneians not yet ready to take on this work and boost the economy? Does the Wawasan Brunei 2035 need a reboot?
Brunei must ensure they have the right people for the job, regardless of whether they are local or not, while they have the luxury of plentiful oil reserves. Rigidly policing immigration is unlikely to be the right answer in the short term.