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Tiny Brunei Looks to Diversify Its Oil-Driven Prosperity
The Washington Diplomat / December 2010

By Larry Luxner

The ambassador of Brunei Darussalam, among the world’s smallest countries, has one of the longest names in the Washington diplomatic corps: Dato Paduka Haji Yusoff Haji Abdul Hamid.

“It’s actually longer, but I shortened it,” jokes the 61-year-old envoy, who goes by Hamid. Since his arrival one year ago from the Bruneian capital of Bandar Seri Begawan, Hamid has worked hard to convince corporate America that his oil-and gas-rich enclave — which shares the island of Borneo with Malaysia and Indonesia — is an ideal international business destination.

“Like any other ambassador, I’m here to promote our interests and enhance our relations with the United States — especially in the areas of education, defense and the environment,” Hamid told The Washington Diplomat in his first-ever interview with U.S. media.

With only 400,000 people living on 5,765 square kilometers of tropical rainforest, Delaware-size Brunei is the least-populated of the 10 member states of the Association of Southeast Asian Nations (ASEAN). And this month, as ASEAN member Burma prepares for a rare election that many are already calling a farce, while Thailand also gears up for a general election following a wave of protests and domestic turmoil, tiny Brunei tends to fly under the political radar.

Thanks to abundant oil and gas reserves, Brunei’s per-capita gross domestic product of $35,200 makes it the envy of Asia. On a purchasing power parity basis, it ranks among the 10 richest nations on Earth.

“We offer our citizens free education through college and beyond, and free health care. People who reach the age of 60 receive pensions, and the government provides help for businesses,” said Hamid, the personal representative of Sultan Haji Hassanal Bolkiah. In 2007, Forbes magazine estimated the sultan’s personal fortune at $22 billion, making him the world’s wealthiest monarch.

In fact, his majesty’s breathtaking palace in Bandar Seri Begawan is a 1,788-room extravaganza that includes, among other things, a 110-car garage and 257 glittering bathrooms. It would be Brunei’s top tourist attraction, if it weren’t off-limits to tourists in the first place.

To a lesser degree, the country’s oil and gas wealth is also reflected in Brunei’s elegant embassy fronting International Court, which is home to a staff of 16 employees. That’s where The Diplomat interviewed Hamid in late August, during the Muslim holy month of Ramadan.

Like 70 percent of his fellow citizens, the ambassador professes Islam — a religion that has influenced all levels of Bruneian tradition and even extends to banking (Islamic financial institutions held nearly 34 percent of all bank assets at the end of 2009, according to government statistics).

Hamid studied in Great Britain and got his bachelor’s degree in economics from Birmingham Polytechnic. In 1986, he earned a master’s from the Fletcher School of Law and Diplomacy at Tufts University. During his one year here, Hamid has traveled to major cities such as Boston, Chicago, Seattle and San Francisco, as well as off-the-beaten-track places like Wichita, Kansas.

We asked Hamid if there’s any poverty in Brunei. “Almost none, depending on how you measure the poverty level,” the diplomat responded. “In Brunei, we have a well-established welfare department that makes sure everybody enjoys a certain standard of living.”

In fact, the World Economic Forum’s 2009-10 global survey on competitiveness ranked Brunei 32nd in the world, and first in the area of macroeconomic stability. And the 2008 U.N. Human Development Index gave Brunei the highest score among ASEAN members and the highest of any Muslim country including the Gulf states of Kuwait, Bahrain, Qatar and the United Arab Emirates.

All that prosperity is made possible by the presence of hydrocarbons, which today account for 90 percent of Brunei’s export earnings, about evenly divided between oil and gas. At the moment, Brunei is the third-largest oil producer in Southeast Asia, averaging 175,000 barrels a day. A system of rigs and pipelines runs throughout Brunei’s exclusive economic zone along the country’s coast, and constant exploration efforts are conducted at onshore and offshore sites.

However, crude oil and natural gas production continues to gradually decline every year, while liquefied natural gas (LNG) production is rising. According to experts, Brunei’s oil reserves will run out in 20 to 25 years, while its gas reserves will likely be depleted within 40 years.

“That’s why we’re trying to diversify and widen our economic base,” said Hamid. “The government is focused on a few specific areas, mainly tourism, financial service and knowledge-based industries.”

Brunei is also trying to make a name for itself as a leading purveyor of food for consumers who follow Islamic dietary laws. To that end, the government of Brunei and Kerry Logistics have recently agreed to create a joint venture, Ghanim International Food Corp., to manufacture halal-certified products for a worldwide market.

A recent 220-page Oxford Business Group analysis of the country says that compared to its Southeast Asian neighbors, Brunei finds itself in a better position to roll out long-term development plans to keep the economy growing in a sustainable fashion. The government has the funding base, clearly formulated investment plans and the political will to follow through with expenditure programs.

“Brunei Darussalam is an oasis of stability for investors during this time of global economic turmoil,” said Vincent Cheong, chief executive officer of the Brunei Economic Development Board. “We have a strong fiscal position and the government has the ability to underwrite employment and social welfare, which has prevented large-scale retrenchments and layoffs.”

In early August, the US-ASEAN Business Council sent a trade mission to Brunei for the first time, led by U.S. energy giants ConocoPhillips and Chevron.

“We’ve never been there and it seemed for us the right time to do it, now that they’re opening up exploratory blocks offshore,” council spokesman Anthony Nelson told The Diplomat. “Also, Brunei is very active in the Trans-Pacific Partnership. They’re one of the four original members of the TPP [the others are Singapore, New Zealand and Chile]. And in October, they’re going to host the third round of negotiations for the TPP, which will serve as a building block for an eventual free trade agreement for the Asia-Pacific region.”

Nelson, who accompanied the group to Brunei, said the most notable fact about the country is that “they’re thinking very actively about their future, not just sitting on their laurels. They’ve been able to make a very comfortable living for themselves from oil and gas revenues, but they know that this is not going to last forever.”

Bilateral trade between the United States and Brunei remains relatively small — only $140 million in 2009. Nevertheless, the country has huge potential, according to Marc Mealy, the US-ASEAN Business Council’s vice president.

“We hope this visit will be part of a larger process of raising awareness in the United States about trade and investment opportunities with Brunei,” Mealy said. “Brunei’s participation in the TPP negotiations is an important contributing factor to an increase in Brunei’s profile among members of the American business community.”

“With the Internet now, a lot of people are aware where Brunei is, and they know about our country,” Hamid said. “We are competing with countries that have advantages over us. But we are politically stable, most people speak English, and we have good infrastructure and a government that can provide facilities for any investor.”

The ambassador also noted that his government is active in conservation and ecotourism efforts. Along with Malaysia and Indonesia, Brunei is part of the World Wildlife Fund’s “Heart of Borneo” campaign that seeks to preserve 220,000 square kilometers of endangered rainforest on Borneo, the world’s third-largest island.

“Brunei has a good track record when it comes to forests,” Hamid said, pointing out that the country occupies less than 5 percent of Borneo, which is home to pygmy elephants, orangutans, leopards and other species now threatened by the logging, palm oil and mining industries. “We are committed to preserving 60 percent of our forest land from being cut down. We’re also working with the Smithsonian Institution on research about climate change.”

While Brunei doesn’t get many eco-tourists, it is a prime destination for foreign laborers from neighboring countries; between 80,000 and 100,000 of them are currently employed in Brunei as construction workers, servants, housemaids and the like — doing menial jobs that locals either cannot or do not want to do. Brunei’s economy depends on these workers, so in that regard it’s quite similar to the oil-rich Gulf states, which are also fueled by guest laborers from India, Pakistan, Bangladesh and the Philippines.

Hamid insisted, however, that abuses of the kind that commonly take place in the wealthy Gulf states against Asian laborers — particularly women working as nannies — are a rarity in Brunei “because we have strict controls on engagement of these workers through our membership in ASEAN. They’re normally engaged for a short term, then they have to leave. So we really never have any problems with them.”

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