Oil nation charts a new course

Ancient Sino-Bruneian trade routes revived amid celebration of 25th anniversary of diplomatic relations

Since the 1920s, Brunei has benefited from bountiful oil reserves that have helped generate an average GDP per capita of $41,000, on par with France, according to the World Bank. The country has the second-highest private car ownership ratio in Asia next to Japan, and its citizens enjoy government-funded services that are the envy of many in the region.

Yet, the blessing of oil has also nurtured a dangerous dependency.

Today, the energy sector represents about 60 percent of Brunei's GDP and 90 percent of government revenue, placing Brunei among the countries most exposed to any volatility in oil prices. Having already contracted for two years in a row, the International Monetary Fund predicts that Brunei's economy will have shrunk a further 0.5 percent in 2015.

To right the ship, ancient trade routes with China that date back to the 14th century are being revived.

By leveraging its geostrategic location, free trade agreements and political neutrality, Brunei aims to tap into the proposed 21st Maritime Silk Road and transform itself into an export hub. Bilateral plans are already being rolled out.

The Brunei-Guangxi Economic Corridor, signed into effect in late 2014, has secured over $500 million in joint investment commitments to develop strategic industries, specifically in bio-innovation, agriculture and aquaculture.

The corridor positions Brunei as a China gateway.

"Through the BGEC, third-party countries can utilize Brunei as a launch pad to access the China market," said Brunei's Minister of Primary Resources and Tourism Dato Ali Apong.

According to Colin Ong, a leading legal advisor in Brunei, commercial arbitration dispute mechanisms may be established to further smooth international business relations.

In Brunei, a Bio-Innovation Corridor was launched as a core special economic zone to nurture the BGEC's value-added strategy.

"The two together have become a type of development package," said Gary Ho, managing director of SQW China, a specialist economics and planning research practice, and a BGEC committee member.

"Mitsubishi has already set up a three-hectare complex for anti-oxidant products and there are more to come," he adds.

The two nations will mark the 25th anniversary of their diplomatic relations this year.

Yet it is the nations' centurieslong trade relations that may have greater impact.

justin@the-businessreport.com

(China Daily 02/23/2016 page6)