The World of Business

Brunei has made a conscious effort towards maturing and diversifying its economy and has entered a new phase of development in this effort. Its per capita GDP is substantially higher than most Third World countries and has a significant income from overseas investments as well as from domestic productions. The government provides all medical services and free education through the university level for all its citizens. It also subsidizes rice and housing.

One concern for Brunei’s leaders is that the nations consistently increasing integration with the world economy may disrupt internal social cohesion. Nevertheless, Brunei increased its standing as a world player by serving as chairman for the 2000 APEC (Asian Pacific Economic Cooperation) forum.

Although its economy is already a successful mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition, in the future, Brunei plans to, among other things, reduce unemployment, upgrade the labor force, build-up the banking and tourist sectors and to continue to broaden its economic base beyond oil gas.

Except in the case that public interest is directly affected as in the case of banks, finance companies, motor vehicle insurers, money lenders and travel agents, there are no restrictions on the types of businesses that may be set up. When public interest is directly affected, businesses must obtain special licenses from the appropriate government agency. In addition, lawyers, auditors, doctors and other professionals must be approved by the government. Nevertheless, a wide range of legal and accounting services is available with many law firms and major accounting firms having significant presences in Brunei.

Foreign land ownership in Brunei Darussalam is only allowed with the prior approval in written form from of His Majesty in Council.

Policies regulating industry including ownership, manpower, government support, and facilities are still open and flexible for all categories of industrial activities. Brunei Darussalam exercises a practical approach in this are allowing a variety of arrangements. Policies relating to ownership allow for full foreign ownership, majority foreign ownership and minority foreign ownership, depending on the type of industry and situation.

Brunei Darussalam can provide a great amount of land and many facilities throughout the entire country; in fact, most of the 12 industrial sites presently developed are ready and available for occupation. It is also possible to obtain large areas for agro forestry and aquaculture. Both tenancy agreements and rental terms are competitive and the sites offer a variety of infrastructure, facilities, and resources.

Brunei Darussalam is committed to maintaining the stability its natural environment and all sites are free from pollution and ecologically well balanced. Moreover, the government practices a policy of sustainable development, banning all polluting industries and monitors any company’s impact on the environment as part of its continuing criteria for engaging in any industry participation.

Foreign investment is welcome in Brunei Darussalam and foreign investors are welcome to participate actively in the country’s current economic diversification program, the crux of which is private sector development. In 1989 the Ministry of Industry and Primary Resources was formed and charged with promoting and facilitating industrial development in Brunei Darussalam. As a rule, Brunei Darussalam provides investors with stability, security, confidence, continuity, and competitiveness.

There are a number of attractive investments incentives ready and available for investors at all points of the cycle from start-up to maturity. In 1975 the Investment Incentive Act was enacted and it offers tax advantages at the start up point and ongoing incentives during the growth and expansion period that are at least as good if not better than incentives offered by other countries in the region. The Investment Incentive Act also provides for encouraging the establishment and development of industrial and other economic enterprises for incident purpose and economic expansion.

Depending on the program, the following benefits may be offered:

• Tax exemptions on imported duties on machinery, equipment, component parts, accessories or building structures;

• Exemption from income tax;

• Tax exemptions on imported raw material not available or produced in Brunei Darussalam intended for the production of the pioneer products;

• Carry forward losses and allowances.

The following tax relief is also proved for companies that are granted pioneer status:

• Exemptions from corporate tax;

• Exemptions from import taxes on raw materials and capital goods for a period ranging from 2 to 5 years, depending on fixed capital expenditure with possible extension at the discretion of the relevant authorities;

Enterprises granted expansion certificates are given tax relief for between 3 to 5 years.

It is also possible to exempt approved foreign loans from paying the 20% withholding tax for interest paid to non-resident lenders.

Foreign equity requirements are flexible in Brunei Darussalam. 100% foreign equity is permitted in many export-oriented industries. The exceptions to this include industries based on local resources and industries related to national food security and car dealership. Some level of local participation is required in these cases.

In 2000, Brunei opened a tax-privileged International Financial Centre. Even before the formal establishment of the IFC, though, Brunei was a thriving commercial center as exhibited by HSBC’s, Standard Chartered’s, Citibank’s, Overseas Union Bank’s, RHB’s, Maybank’s, Baiduri Bank’s, Islamic Bank of Brunei Berhad’s, Islamic Development Bank of Brunei’s, and The Brunei Islamic Trust Fund’s active presence.

Brunei goal is to position its sovereignty, wealth and human resources in a conservative but assertive manner. The Brunei IFC provides a wide-range of international legislation that has been thoughtfully designed to allow modern, flexible, cost effective capabilities, including the entire range of facilities necessary to efficiently conduct global business.

The Brunei IFC will also meet regularly with international regulatory bodies. This will make Brunei a "dual jurisdiction", through which "offshore" facilities will be offered based upon international legislation next to the usual range of "domestic" legislation, which was drawn from that of England and Wales. In other words the jurisdictional distinction will be purely legal rather than physical and as such the judicial system will relate to both domestic and international law.

The first portion of IFC legislation included the implementation of measures against money laundering and criminal conduct (recovery of proceeds) that meet international standards. In addition, before these activities began, meaningful and enforceable regulation of the Trust, Company Administration, Securities, Insurance and Banking industries was legislated for and established. Brunei also has a tradition of severe drug trafficking legislation has been in place for some time.