Country risk reference rating: level 3 (3/9)
Country Risk Outlook: Stable
Economic risks
Brunei’s extractive industry, mainly petroleum, is developed, while its processing industry and agriculture are relatively weak. In recent years, Brunei has begun to implement an economic diversification strategy. However, the current national economic development still relies heavily on the oil industry, and the impact of international oil price fluctuations on Brunei’s economy is still obvious. Brunei’s debt pressure is small, its balance of payments and public finances are in good condition, and its financial system is developing rapidly, which deserves attention. In 2012, Brunei’s nominal GDP was US$16.51 billion, per capita GDP was US$39,450, and the real economic growth rate was 0.9%. In 2012, Brunei’s GDP growth rate was 0.9%, which was significantly lower than the 2.2% in 2011. The main reason was that the output of oil and gas extraction and natural gas liquefaction processing decreased by 1.2% and 1.5% year-on-year. Currently, the Brunei government is actively promoting economic transformation and striving to achieve diversified economic development. However, the value added of non-oil and gas industries only achieved a 4% growth in 2012, and the effect remains to be seen. It is expected that Brunei’s economy will continue to grow at a relatively low rate in the next few years.
Bilateral economy and trade
In 2010, the China-ASEAN Free Trade Area was launched, and the bilateral trade volume between China and Brunei further increased, exceeding US$1 billion. In 2012, the bilateral trade volume between the two countries reached US$1.61 billion, a year-on-year increase of 22.9%. At present, trade imbalance is the main problem existing in bilateral economic and trade cooperation between the two countries. Since the establishment of the China-ASEAN Free Trade Area in 2010, China’s surplus has become increasingly apparent. The surplus reached US$890 million in 2012, a record high, and this trend is likely to remain long-term. In addition, the commodity structure of trade between China and Brunei is relatively simple: China mainly imports oil and gas from Brunei, and exports food, textiles, home appliances, automobiles, building materials, transportation equipment, etc. to Brunei. Fluctuations in Brunei’s oil and gas volumes will affect bilateral trade to a great extent. For example, in 2012, China imported US$355 million of crude oil from Brunei, accounting for almost 100% of the import volume.
Business environment
Brunei’s business and investment environment is relatively good. Due to the good business and investment environment and policy support, Brunei’s ranking in the “2013 Doing Business Report” released by the World Bank has improved since the 2008 financial crisis. In 2013, the ranking rose by 4 places to the world’s No. 1 ranking. 79, ranking 4th among the 10 ASEAN countries after Singapore, Malaysia, and Thailand. At present, the Brunei government has promulgated the Economic Development Law (2001) and Industrial Adjustment Order and other relevant regulations, and actively introduced policies to attract foreign investment. For example, Brunei does not directly levy personal income tax, nor does it have export tax, sales tax, payroll tax, production tax, etc. Tax, business tax.
Overall risk assessment
Generally speaking, Brunei’s political situation is stable, the country is prosperous, the people’s lives are comfortable, and social security is good. In the future, Brunei’s legislative body is expected to gradually play a substantial role in political life. Brunei has harmonious relations with neighboring countries and has no major security threats. In recent years, it has gradually become a target of wooing by the United States and other Western countries. Economically, Brunei has a single economic structure and is easily affected by international oil and gas prices. In the future, the government’s main task is to promote the transformation of the economic structure, focusing on the development of non-oil and gas industries and further opening up the foreign economy, which will bring opportunities for foreign investment. However, fluctuations in international crude oil prices will affect Brunei’s economic development to a certain extent. Brunei has a good business environment and legal environment. As the government adopts an economic diversification strategy, investment opportunities are worthy of attention.
Based on the analysis and assessment of the current overall situation, Brunei’s country risk reference rating is 3 (3/9), with a low country risk level and a stable country risk outlook.
(Issuing agency: China Export and Credit Insurance Corporation)
