Brunei Darussalam - Economic development
The two major themes that have guided Brunei's economic development plans have been the managed exploitation of its oil and gas resources, and diversification of the economy beyond the petroleum sector. Perrenially, it has been more successful at the first than the second. In the recent years, the problem has been aggravated by the scandalous collapse in 1998 of the Amedeo Development Corporation, the country's largest non-petroleum conglomerate, with revelations that under the management of the Sultan's younger brother, Pince Jefri, who was also Finance Minister and head of the Brunei Investment Agency (BIA), as much as $28 billion in public investment funds had been misallocated, and lost. What possibilities there were for economic diversification were per force put on hold for 1999 and 2000 while the government recovered not only from the loss of funds, but from the loss of confidence in its economic management. In 2001, however, the government announced a series of initiatives that indicated it had weathered the scandal, and was ready to revive its development efforts in both the petroleum and the non-petroleum sectors. In March, Global Everygreen, a government entity, announced that all outstanding debts of the Amedeo Corporation had been settled out-of-court, and that it was, further, taking over a number of the projects Amedeo had started with the intention of completing many of them. Later in 2001, the government created a new Brunei Economic Development Board (BEDB) charged expressly with implementing government policies to encourage domestic investment and attract foreign investment that would contribute to Brunei's economic development. As head of the BEDB, effective July 2002, the government appointed John A. Perry, a British national who had most recently been a managing director for Totalfina Elf in Asia.
For years virtually all of Brunei's oil and gas exploration, development, processing and trading was conducted by Brunei Shell Petroleum Corporation (BSP), a 50–50 joint venture of the government and Royal Dutch/Shell. In November 2001, however, Sultan Bolkiah announced the creation of a wholly government-owned, national oil company, the Brunei National Petroleum Company Sendirian Berhad—PetroleumBRUNEI, for short— which would "play a more active role in both petroleum exploration and development." The government also announced that in the future Production Sharing Contracts (PSCs) would replace concessions in the oil and gas sector. In 2002, two PSCs were reached with consortiums that included Australian, French, Japanese, and American companies, and only one of which included Royal Dutch/Shell, for the first two deep sea parcels opened in Brunei's Exclusive Economy Zone. Two of BSP's concessions are up for renewal in 2003, which the government may use as an opening for introducing more new players.
Brunei's economic development initiatives have been structured in terms of a series of National Development Plans. The two main traditional employers were the government, which absorbs about half the work force, and Brunei Shell Petroleum. Development efforts for a non-oil, non-state sector and the potential for increasing foreign investment have been limited by the small domestic market, a shortage of skilled manpower, and relatively high labor and transport costs. The national development plan for 1986–90 (the fifth) was, like the subsequent ones, concerned with diversification of the economy in order to prepare for the time when oil and gas reserves would run out. It emphasized development of the agricultural sector to lessen the country's reliance on imported foods. Industrial development projects focused on light industries, but also included plants for the production of cement and precast concrete. Service industries were encouraged, especially banking and finance, in the hope of developing Brunei into an international financial center. The establishment of a development bank also ranked high on the government's agenda. The sixth national development plan (1991–95) gave special emphases to stimulating growth of the private sector, to promoting human resources and industrial development. The largest budget allocation was for social services (29.3%), with equal percentages for public utilities and transport and communications (20% each), 10% allocated to trade and industry, and about 7% to security forces. The ambitious programs of the seventh national development plan for 1996 to 2000 to achieve diversifcation through increased privatization, and domestic and foreign investment were shattered in the double blow of the Asian financial crisis in 1997 and the scandalous collapse of the Amedeo Corporation, Brunei's flagship investment conglomerate, in 1998. Most of this rest of this plan period was spent recovering from the effects of the loss of funds and loss of business confidence. The eighth national development plan (2001 to 2005) has added a more aggressive and engaged exploitation of the oil and gas sector to the perennial concern with diversification beyond this sector. In late 2001, the government announced that an additional $1 billion would be made available for development projects in 2002.