Brunei has long been ruled by sultans (kings), though for much of its modern history those sultans have ruled in cooperation with European colonial powers. Spanish and Dutch colonists began arriving in Brunei in the 16th century. English colonists came during the 17th century, and the country was made a British protectorate in 1888, which meant that Britain provided military and economic assistance. During World War II (1941), the Japanese occupied the country. The British returned after the war, and negotiations began for Brunei's eventual independence. In 1959 a written constitution was introduced granting Brunei internal self-rule under British protection. In 1984 Brunei achieved full independence and became an independent sovereign sultanate governed on the basis of a written constitution.
The 1959 constitution granted the sultan full executive authority, but called for an elected legislative council. A limited effort to meet this requirement with a partially elected legislative body was tried but quickly abandoned. In 1962 the Partai Rakyat Brunei (Brunei People's Party, PRB) won the election for the legislative council but was denied access to office. The party's ensuing uprising was rapidly crushed by the ruling sultan and the PRB was then banned. Since that time the legislative council has been an appointed body. Currently, the Brunei Solidarity National Party (PPKB), with closer allegiance to the government, is the only legal political party. In 1995, for the first time in 10 years, the PPKB was permitted to hold its national assembly, but its activities were circumscribed, and the party has had little influence.
Brunei is an Islamic sultanate. The hereditary sultan is the head of state and holds ultimate authority. He is also the country's prime minister, minister of finance, and minister of defense, and presides over a council of ministers, a religious council, a privy council, and a council of succession, all of whose members he appoints. There are no popular elections and the Legislative Council functions in a purely consultative capacity. The concept of Melayu Islam Beraja (Malay Muslim Monarchy, MIB) was introduced as a state ideology, invoking Brunei's history of monarchy, Brunei Malay culture, and Islamic values, in order to justify absolute monarchy.
The government plays a large role in the economy. In the 1990s the government has made concerted efforts to diversify the economy from oil and gas. Industries promoted by the government are agriculture, manufacturing, tourism, commerce, and banking. In the Seventh National Development Plan (1996-2000), the government allocated more than B$7.2 billion for the implementation of various projects and programs. Thanks to such commitments, the non-oil sector's contribution to the GDP rose from 24.3 percent in 1991 to 66 percent in 1998. The government actively encourages more foreign investment. It extends "pioneer status" to aircraft catering services as well as the cement, textile, furniture, glass, plastics, and synthetic rubber industries. Pioneer status companies can get exemption from the 30 percent corporate tax.
One of the government's most important priorities is to encourage Brunei Malays to move into the private sector from the public sector where most are employed. The government policy of "Bruneisation" of the workforce encourages Brunei Malays to work in the private sector. The Brunei Shell Petroleum (BSP) company and the 2 largest foreign banks, the Hong Kong and Shanghai Banking Corporation and Standard Chartered Bank, have had to increase the number of Brunei Malays on their staffs under this policy. The Bruneian government also boosts private business to nurture Brunei Malay leaders in industry and commerce.
The sole tax levied by the government of Brunei is the corporate tax, generally 30 percent. Otherwise, everything that is normally taxed in other countries— capital, gains, import and export, sales, manufacturing—is free of tax, and there is no personal income tax . The huge government revenues from oil and gas are sufficient to finance government expenditures, and Brunei is the least taxed country in the region and perhaps in the world.