Oil-rich Brunei to broaden economic base

Oil-rich Brunei to broaden economic base

KUALA LUMPUR (AP): After more than four decades of petrodollar prosperity under the rule of one of the world's richest men, Brunei has admitted that its economy is unsustainable and over- dependent on crude oil exports.

The Southeast Asian sultanate is facing rising unemployment and a chronic budget deficit, Yahya Abu Bakar, permanent secretary in the prime minister office, said Monday.

In an interview with state television on Monday, Yahya, who is one the country's top bureaucrats, said the government would invest heavily in the downstream oil and gas sector to broaden its economy.

The Brunei government released the text of the interview.

Brunei each day pumps about 200,000 barrels of oil and generates an equivalent amount of natural gas to support its 320,000 people and one of the world's richest monarchies.

The exports have made Brunei - once a backwater trading entrepot - a paradise of tax-free wages, free education and health care, subsidized housing and wide boulevards with the latest Mercedes and BMW sedans.

Almost everyone is rich by the region's standards. Even after Asia's recent economic slowdown, Brunei's gross domestic product is about 7 billion Brunei dollars (US$4 billion).

But now, Brunei has to look for other sources of income and investment, Yahya said in his interview.

He said a government masterplan had identified oil refining, petrochemicals and energy intensive industries like aluminum smelting as the most promising options. A detailed study is underway and a decision is expected in two months, he said.

"We hope the industries identified by this study will help to create more jobs, more spin-offs in terms of creating more industries downstream and also perhaps get rid of some of the budget deficit," he said.

Ian Williams, an Australian consultant who is the architect of the new plan, said among the challenges to identify new industries was accepting that a refinery based on imported crude was more profitable than refining the country's own oil. His remarks were part of the government statement.

Studies have showed that local crude fetched premium prices due to their low sulfur content.

The reclusive sultanate on Borneo island hopes that establishing links with big world players like the United States and Japan will provide added momentum to its plans when it plays host to the 21 leaders from the nations of the Asia-Pacific Economic Cooperation forum in November.