Oil-rich Brunei declares sweeping economic reforms
Oil-rich Brunei declares sweeping economic reforms
BANDAR SERI BEGAWAN (AFP): Mindful that its vast oil resources would run out in 25 years, Brunei on Sunday announced sweeping economic reforms including plans to impose income taxes, slash subsidies and set up a regional financial hub.
Officials said the Asian financial crisis in 1997 had jolted the tiny Southeast Asian sultanate into realizing it has to shed its almost total dependence on oil and gas revenues.
"We are now opening up to the world. We know we lag behind our neighboring countries," said Wahab Juned, director-general of the Brunei Economic Council, a private-sector dominated advisory body.
He said at a news briefing here the financial crisis was a "blessing in disguise" because "it taught us in many ways in terms of preparing for sustainable growth in the future."
Wahab said estimates show Brunei's oil and gas reserves, which have brought prosperity to the nation of more than 300,000 people, would last another 25 years.
Now the sultanate is in a race against time to restructure the economy before its most precious resources run out.
Wahab said the government was in the process of introducing tax reforms to widen the revenue base as well as remove some subsidies.
Brunei citizens currently do not pay income taxes, there is no interest on housing loans and health care is free.
Wahab said an announcements will soon be made for privatizing a key government-owned company which he declined to identify.
On his 54th birthday Saturday, Brunei's ruler Sultan Hassanal Bolkiah said his kingdom has established a financial center aimed at making the state a regional hub.
The Brunei International Financial Center "is designed to make our nation state as the financial center for monetary sector, banks, security and insurance," he said.
Deputy Finance Minister Selamat Munap said the financial center would borrow features from international financial centers in Singapore and Bahrain.
Five legislations relating to international banking and trusts were already in place, and regulations on insurance licensing, securities and mutual funds would be ready by year-end.
"It's about time for us to be more pragmatic about requirements," Wahab said Sunday. "We need to do things which are normal for every country to do in terms of managing assets better. We don't want to be caught by surprises," he said.
Brunei's gross domestic product is forecast to grow 3.0 percent this year, virtually unchanged from 1999. The annual population growth rate is faster at 3.1 percent.
Total GDP value last year was 8.2 billion Brunei dollars (US$4.7 billion).
The economy is forecast to grow between 4.4-4.5 percent in 2001. Wahab declined to give figures on the government's foreign reserves but stressed that Brunei's financial position "is still strong."
The country was rocked by scandal in 1998 following a battle royale between Sultan Bolkiah and his flamboyant brother Prince Jefri Bolkiah, who was accused of squandering billions of U.S. dollars from a firm managing Brunei's petrodollar investments.
Brunei hopes to bolster its international image when it hosts the Asia Pacific Economic Cooperation (APEC) summit in November.
The summit gathers the leaders of 21 Pacific rim economies, including US President Bill Clinton, Chinese leader Jiang Zemin and the prime ministers of Japan and Australia.