1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Brunei has an open economy favorable to foreign trade and FDI as the government continues its economic diversification efforts to limit its long reliance on oil and gas exports.
FDI is important to Brunei as it plays a key role in the country’s economic and technological development. Brunei encourages FDI in the domestic economy through various investment incentives offered by the Ministry of Finance and Economy.
Improving Brunei’s Ease of Doing Business status by upgrading the domestic business regulatory environment through a whole-of-nation approach has been a priority for the government. The World Bank Ease of Doing Business report indicated that Brunei ranked 66th overall out of 190 world economies in 2019. Brunei ranked first in the report’s “Getting Credit” category, tied with New Zealand, indicative of Brunei’s strong credit reporting mechanisms.
Brunei amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities (eateries, boarding and lodging houses or other places of public resort; street vendors and stalls; motor vehicle dealers; petrol stations, including places for storing petrol and inflammable material; timber store and furniture factories; and retail shops and workshops) from needing to obtain a business license. The Miscellaneous License Act (Amendment) of 2015 reduced the wait times for new business registrants to start operations, with low-risk businesses like eateries and shops able to start operations immediately.
Limits on Foreign Control and Right to Private Ownership and Establishment
There is no restriction on foreign ownership of companies incorporated in Brunei. The Companies Act requires locally incorporated companies to have at least one of the two directors—or if more than two directors, at least two of them—to be ordinarily resident in Brunei, but exemptions may be obtained in some circumstances. The corporate income tax rate is the same whether the company is locally or foreign owned and managed.
All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance and Economy. Foreign investors can fully own incorporated companies, foreign company branches, or representative offices, but not sole proprietorships or partnerships.
More information on incorporation of companies can be found on the Ministry of Finance and Economy website: https://www.mofe.gov.bn/divisions/incorporation-of-companies.aspx .
Other Investment Policy Reviews
The World Trade Organization (WTO) Secretariat prepared a Trade Policy Review of Brunei in December 2014 and a revision in April 2015.
As part of Brunei’s effort to attract foreign investment, the government established the Brunei Economic Development Board (BEDB) and Darussalam Enterprise (DARe) as facilitating agents under the Ministry of Finance and Economy. These organizations work together to smooth the process of obtaining permits, approvals, and licenses. Facilitating services are now consolidated into one government website: https://business.mofe.gov.bn/SitePages/Home.aspx .
BEDB is the government’s frontline agency that promotes and facilitates foreign investment into Brunei. BEDB is responsible for evaluating investment proposals, liaising with government agencies, and obtaining project approval from the government’s Foreign Direct Investment and Downstream Industry Committee.
A major share of outward investment is made by the government through its sovereign wealth funds, which are managed by the Brunei Investment Agency (BIA) under the Ministry of Finance and Economy. No data is available on the total investment amount due to a strict policy of secrecy. It is believed that the majority of sovereign wealth funds are invested in foreign portfolio investments and real estate. Despite the limited availability of public information regarding the amount, the funds are generally viewed positively and managed well by BIA.
4. Industrial Policies
Companies involved in the exportation of agriculture, forestry, and fishery products can apply for tax relief on export profits. Tax exemption may be available for pioneer industry companies. For non-pioneer enterprises, the tax relief period is eight years and up to 11 years for pioneer enterprises.
In 2015, the government reduced the corporate income tax rate in Brunei from 20 percent to 18.5 percent.
Sole proprietorships and partnerships are not subject to tax. Individuals do not pay any capital gains tax, and profits arising from the sale of capital assets are not taxable. Brunei has double-taxation agreements with the United Kingdom, Indonesia, China, Singapore, Vietnam, Bahrain, Oman, Japan, Pakistan, Malaysia, Hong Kong, Laos, Kuwait, Tajikistan, Qatar, and United Arab Emirates. Under the Income Tax (Petroleum) Act, a company is subject to taxes of up to 55 percent for any petroleum operation pursuant to production sharing agreements.
Darussalam Assets is a private limited company established in December 2012 under the purview of the Ministry of Finance and Economy to spur the growth of government-linked companies (GLC) through active ownership and management of its GLC portfolio based on commercial principles, in line with Brunei’s 2035 development vision. More info on Darussalam Assets may be found at their website .
Foreign Trade Zones/Free Ports/Trade Facilitation
In 2017, Brunei announced the creation of its first Free Trade Zone, Terunjing Industrial Park, a 235-acre site located between two main highways near Brunei International Airport and Muara Port.
Darussalam Enterprise (DARe), under the Ministry of Finance and Economy, works closely with other relevant government agencies to facilitate the implementation of investors’ projects. DARe oversees and manages 26 industrial parks across Brunei.
Performance and Data Localization Requirements
The Brunei government seeks to increase the number of Bruneians working in the private sector. Brunei’s Local Business Development Framework seeks to increase the use of local goods and services, train a domestic workforce, and develop Bruneian businesses by placing requirements on all companies operating in the oil and gas industry in Brunei to meet local hiring and contracting targets. These requirements also apply to information and communication technology firms that work on government projects. The Framework sets local content targets based on the difficulty of the project and the value of the contract, with more flexible local content requirements for projects requiring highly specialized technologies or with a high contract value. In 2019, senior officials stated an intent to extend local hiring targets to additional sectors of the economy.
Expatriate employment is controlled by a labor quota system administered by the Labor Department and the issuance of employment passes by the Immigration Department. Brunei allows new companies to apply for special approval to expedite the recruitment of expatriate workers in select positions. According to the Ministry of Home Affairs, the special approval is only available to new companies for up to six months and covers businesses such as restaurants and retail stores. The special approval cuts the waiting time for a quota from 21 days to seven.
Brunei has not announced any specific legislation pertaining to data storage and data localization requirements.
6. Financial Sector
Capital Markets and Portfolio Investment
In 2013, Brunei signed a Memorandum of Understanding (MOU) with the Securities
Commission Malaysia (SCM) designed to strengthen collaboration in the development of fair and efficient capital markets in the two countries. It also provided a framework to facilitate greater cross-border capital market activities and cooperation in the areas of regulation as well as capacity building and human capital development, particularly in the area of Islamic capital markets. In March 2019, the Minister of Finance and Economy II announced a USD $292 million national budget, which will fund infrastructure, technology, and socio-economic studies related to the implementation of Brunei’s own stock exchange.
Money and Banking System
Brunei has a small banking sector which includes both conventional and Islamic banking. The Monetary Authority of Brunei Darussalam (AMBD) is the sole central authority for the banking sector, in addition to its role as the country’s central bank. Banks in the country have high levels of liquidity, good capital adequacy ratios, and well-managed levels of non-performing loans. A handful of foreign banks have established operations in the country such as Standard Chartered and Bank of China (Hong Kong). In March 2018, HSBC officially ended its operations in Brunei after announcing its planned departure from Brunei in late 2016. All banks fall under the supervision of AMBD, which has also established a credit bureau that centralizes information on applicants’ credit worthiness.
The Brunei dollar (BND) is pegged to the Singapore dollar, and each currency is accepted in both countries.
Foreign Exchange and Remittances
In June 2013, the Financial Action Task Force (FATF) announced that Brunei would no longer be subject to FATF’s monitoring process under its global Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) compliance process. Brunei’s Mutual Evaluation Report cited Brunei’s significant progress in improving its AML/CFT regime and noted that Brunei had established the legal and regulatory framework to meet its commitments in its Action Plan regarding strategic deficiencies that the FATF identified in June 2011.
Any person or company providing services for the transmission of money must be licensed by the Brunei government. Only Brunei citizens may hold remittance licenses. Local financial institutions such as Bank Islam Brunei Darussalam (BIBD) and Standard Chartered Bank provide remittance services. Remittance companies require the customer’s full name, identification number, address, and purpose of the remittance. They are also required to file suspicious transaction reports with AMBD.
Sovereign Wealth Funds
The Brunei Investment Agency (BIA) manages Brunei’s General Reserve Fund and their external assets. Established in 1983, BIA’s assets are estimated to be USD $60-75 billion. BIA’s activities are not publicly disclosed and are ranked the lowest in transparency ratings by the Sovereign Wealth Fund Institute.
10. Political and Security Environment
Brunei is an absolute monarchy and has no recent history of political violence. Sultan Hassanal Bolkiah is an experienced and popular monarch who rules the country as Prime Minister while also retaining the titles of Minister of Finance and Economy, Minister of Defense, and Minister of Foreign Affairs. The country experienced an uprising in 1962 when it was a British protectorate, which ended through the intervention of British troops. The country has been ruled peacefully under emergency law ever since. Brunei has managed to avoid demands for political reform by making use of its hydrocarbon revenues to provide its citizens with generous welfare benefits and subsidies.