The Diversification Challenge
The Sultanate of Brunei is a small South-East Asian nation of approximately 400,000 people. Covering an
area of around 5,700 square kilometres, it is bordered by Malaysia and the South China Sea. Brunei has
one of the highest per capita incomes in Asia and one of the highest rates of macroeconomic stability in
the world. The World Economic Forum's "Global Competitiveness Report 2009-10" ranked Brunei first out
of 134 countries in terms of its macroeconomic stability. (1) Potentially, this gives Brunei considerable
appeal in the eyes of foreign investors who seek above many things to minimise investment risk.
Despite its wealth, Brunei's economic fortunes rely almost entirely on the country's oil and gas industry,
which contributes 54% of Gross Domestic Product (GDP). Brunei's oil and gas sector props up the public
sector, which employs approximately 70% of Brunei's workforce. Bruneian policy-makers acknowledge that
this situation limits incentive and opportunity for entrepreneurship and business development in new
industries. They also recognise that the government sector will not be able to continue to offer university
graduates employment at previous levels.
Besides oil and gas, other industries which contribute to Brunei's economic wealth include manufacturing,
government services, construction, trade and finance. However, the contribution of these industries pales in
comparison to the nation's mineral wealth. Nevertheless, as a number of recent studies have demonstrated,
there are opportunities to capitalise on these capabilities for economic development, for example in
petrochemicals and energy, and to discover and grow emerging industries like tourism, education, biodiversity,
food, pharmaceuticals and logistics. More recently, opportunities have been identified to explore the creative
industries and advanced business services. These opportunities resonate with the Brunei government's policy
of economic diversification, underpinned by a desire for more balanced and sustainable growth, to transition
the economy away from its dependence on the country's oil and gas resources to one more akin to a ‘knowledge
Although Brunei's economic stability offers some appeal to prospective investors, the country is limited by way
of a clear land use strategy for commercial and industrial development. This is significant because land, as one
of the essential factors of production alongside a skilled and flexible workforce, is an essential precondition for
In response, Brunei's independent think-tank, the Centre for Strategic and Policy Studies (CSPS) has
commissioned SGS Economics and Planning to prepare a ‘Land Optimization Strategy for Industrial and
Commercial Growth in Brunei Darussalam', expected for completion by mid 2010. It will complement and take
further the country's National Land Use Master Plan 2006-2025 and its Long Term Development Plan. It will
have a strong economic development dimension, providing strategies to facilitate foreign direct investment (FDI)
and the development of economic sectors (or clusters) to drive Brunei's economic diversification.
Catalyst for growth: Foreign Direct Investment attraction Foreign Direct Investment (FDI) is any form of investment
that earns interest in enterprises which function outside of the domestic territory of the investor. The direct
investment in buildings, machinery and equipment is in contrast with making a portfolio investment, which is
considered an ‘indirect investment'. In the context of Brunei's economic diversification challenge, FDI is
considered to be a catalyst or ‘kick-start' for future growth. It is an important part of the solution for Brunei,
but it is not sufficient. Facilitation of business growth and development from within is also vital. This includes
the development of Brunei's small to medium sized enterprise (SME) sector as well as other businesses such
as new government corporations.
Strategy framework: a holistic approach The Land Optimization Strategy will project industrial and commercial
land use requirements for achieving and maintaining economic diversification for Brunei over a long-term period
- to 2035 and beyond. Land has a critical role to play as a catalyst for both economic diversification and foreign
direct investment attraction. For this reason, ways of attracting FDI that focus on land use planning and
administration, will form a central plank in the readily implementable strategies that will be identified.
However, strategies for the optimization of commercial and industrial land must be developed in a holistic fashion.
In other words, the Sultanate cannot address matters around land administration, statutory planning and
industrial/ commercial land use planning without also addressing matters concerning infrastructure, urban form
and function and Brunei's regulatory environment. Prospective investors will also respond favourably to a
government that is seen to encourage innovation and enterprise.
Therefore, strategies for optimal use of commercial and industrial land, to help attract FDI, will also need to
consider Brunei's ‘economic development pillars', that is, the foundations which support all other strategic
planning and implementation efforts. This includes: (1) innovative and collaborative governance; (2), education,
training, R&D and skills formation; and (3) enterprise growth from within Brunei (that is, the growth of SMEs).
The Land Optimization Strategy will complement and further the objectives of NLUMP 2006-25 by providing
recommended land use frameworks to accommodate industry clusters, with a focus on the aim of economic
diversification and sustainable development.
The role of innovative and collaborative governance Effective implementation of the Land Optimization Strategy
will require the concerted and co-ordinated efforts of Brunei's various Government Ministries and Departments.
The Government's primary role will be to put in place the necessary preconditions to ensure that industry is
well placed to compete and prosper on the global stage.
These preconditions or ‘enablers' of economic development include: efficient and effective physical infrastructure;
a skilled and flexible workforce; a quality living environment to attract and retain that skilled workforce;
appropriately located and serviced employment land; connectedness between members of industry clusters
(businesses, government agencies, labour and research and learning institutions); and a supportive governance
Returning to the argument for land optimization in Brunei Darussalam, strategies for economic diversification
will need to be supported by a strategic land use planning framework which assists co-ordination and integration
of economic opportunity with physical planning. To achieve this will not only require innovation to grow new
industry such as the creative industries: it will also require an innovative and collaborative public sector.
Therefore, the Land Optimisation Strategy will need to focus on strategies for encouraging innovative and
collaborative governance, as well as other strategic foci concerning land administration, statutory planning
and industrial and commercial land use planning. By taking a holistic approach to the Land Optimization
Strategy, it is expected that Brunei will have a much greater likelihood of success in realising optimal land
use for economic diversification.
As the study progresses and as consultation takes place, the direction outlined above may be adjusted.
Most if not all of the possible initiatives have been already been initiated in some form under current economic
development policies. It may be that a ‘game changing' project (such as the establishment of a special
purpose zone to encourage appropriate industrial development for example, or a suite of projects, is
imminent. To this end it is timely that a high priority is being placed on the land resource issue to ensure
that this essential, but not sufficient, aspect of investment facilitation is dealt with in efforts to diversify and
grow Brunei's economy in a sustainable fashion.
1. Oxford Business Group, 2010
Bhaskaran, M., 2007. Economic Diversification in Brunei Darussalam. Centre for Strategic and Policy Studies.
Negara Brunei Darussalam Ministry of Development Department of Town and Country Planning, 2008. National
Land Use Master Plan 2006-2025.
Negara Brunei Darussalam Prime Minister's Office, 2006. National Development Plan (RKN) 2007-2012.
Oxford Business Group, 2010. The Report: Brunei Darussalam 2010. London.
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